Iob Allowed To Write Off Rs 1,000cr Losses

Indian Overseas Bank (IOB) has been allowed to write off Rs 1,000 crore of its accumulated losses against its equity capital. The bank has an accumulated loss of Rs 1,090 crore.

With this writeoff, the accumulated loss would come down to Rs 90 crore, banking sources said. Accordingly, the equity capital of the bank is expected to shrink to about Rs 334 crore.

Sources said the remaining losses (Rs 90 crore) after the writeoff would be set off against the profits made during fiscal 1996-97. They, however, declined to give the profit figures for the year, saying that auditing of IOBs account was under way. The bank is expected to announce its financial results early next month.

 

The capital writeoff would also enable the bank to show an earning per share on the reduced equity base if the auditors approve, the sources said. It could also enable the bank to enter the capital market to strengthen its tier-I capital for increasing its risk-weighted assets.

IOB is the second bank after Bank of India to have been allowed to write off its losses against equity capital. The writeoff had enabled BoI to enter the market with a premium issue.

Others like Canara Bank and Corporation Bank had chosen to return capital to the government. This reduction in capital would not, however, result in premature redemption of the recapitalisation bonds, the sources said. Capital infusions by the government had to be reinvested into low-coupon government securities.