Tag: Indian Overseas Bank

Bottomline back in black, IOB wants to be out of PCA, BFSI News, ET BFSI

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Chennai, With its bottomline back in black after a long time, the Indian Overseas Bank (IOB) has approached the Reserve Bank of India (RBI) seeking it be taken out of the Prompt Corrective Action (PCA) fold, a top official said.

Managing Director & CEO Partha Pratim Sengupta also said that the IOB plans to raise additional funds of about Rs 2,000 crore from a follow-on equity issue and Rs 1,000 crore by issue of bonds.

Addressing reporters, Sengupta said the bank has approached the RBI to be taken out of PCA as its financial metrics have turned good.

The bank also said it plans to come out of PCA by focusing on loan recovery, low cost deposits and less capital consuming advances.

The bank closed last fiscal with a net profit of Rs 831 crore as against a net loss of about Rs 8,527 crore.

The total income for the year ended March 31, 2021 stood at about Rs 22,525 crore as against about Rs 20,712 crore for FY20.

According to Sengupta, the income from treasury operations had beefed up the bank’s other income and the reduction in cost of funds contributed to the profitability.

In a regulatory filing, the IOB said its Board has approved the issue of 125 crore equity shares at an appropriate premium to the public by way of follow-on public offer/rights issue with or without participation of the government.

The Board also decided that the issue could also be to qualified institutional buyers, employee shareholders, and on preferential basis to insurers and mutual funds.

It also approved the issue of Basel III compliant tier II bonds up to Rs 1,000 crore in one or more tranches on private placement or public issue.

On March 31, 2021, the IOB had received Rs 4,100 crore as capital infusion by the government at an issue price of Rs.16.63 per equity share of Rs.10 each.

During the year under review, IOB’s total business stood at Rs 3,79,885 crore (deposits Rs 2,40,288 crore, advances Rs 1,39,597 crore) up from Rs 3,57,723 crore (deposits Rs 2,22,952 crore, advances Rs 1,34,771 crore).

The bank said it had recovered about Rs 6,831 crore from non-performing assets (NPA) accounts last fiscal.

The bank’s gross NPA (GNPA) reduced from 14.78 per cent as at March 31, 2020 to 11.69 per cent as at March 31, 2021.

The net NPA (NNPA) went down from 5.44 per cent, as at March 31, 2020, to 3.58 per cent as at March 31, 2021.

Sengupta said IOB is targeting GNPA of less than 10 per cent this fiscal.

According to him, the bank has identified about Rs 8,000 crore loan for restructuring and a cash recovery target of about Rs 4,600 crore.

Sengupta also said that the IOB had merged 53 branches last fiscal and one or two branches may be merged this year.



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Indian Overseas Bank Q4 profit rises over 2-folds to ₹350 crore

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State-owned Indian Overseas Bank (IOB) on Monday reported a jump of over two times in its net profit at ₹349.77 crore in the last quarter of the fiscal ended March 2021.

The bank had posted a net profit of ₹143.79 crore in the same period a year ago.

Total income during Q4FY21 rose to ₹6,073.80 crore as against ₹5,484.06 crore in Q4FY20, IOB said in a regulatory filing.

Provisions for bad loans and contingencies for the reported quarter increased to ₹1,380.46 crore as against ₹1,060.38 crore parked aside in the corresponding period a year earlier.

For the full year 2020-21, the bank reported a net profit of ₹831.47 crore. There was a net loss of ₹8,527.40 crore in 2019-20.

Total income during the year increased to ₹22,524.55 crore from ₹20,712.48 crore in the previous fiscal year. Bank’s asset quality showed improvement with the gross non-performing assets (NPAs) falling to 11.69 per cent of the gross advances as of March 31, 2021 from 14.78 per cent by year ago same period.

In value terms, the gross NPAs or bad loans were of the order of ₹16,323.18 crore, down from ₹19,912.70 crore.

Net NPAs fell to 3.58 per cent (₹4,577.59 crore) from 5.44 per cent (₹6,602.80 crore).

The bank said its board of directors has approved the capital plan for 2021-22 under which it will issue equity shares up to a maximum extent of 125 crore shares by way of follow on public offer/rights issue.

The issue may be with or without participation from the government or to qualified institutional buyers (QIBs), the lender said.

It may be also on a preferential basis to LIC and other insurance companies or mutual funds/QIBs. The issuance of shares is subject to shareholders approval, IOB said.

Besides, the board also approved to raise tier II capital by issuing Basel III compliant bonds up to ₹1,000 crore in one or more tranches. The issue may be through a private placement or to retail segment by public issue, either domestically or overseas, it added. IOB scrip traded at ₹21.20 apiece on BSE, up 2.66 per cent from previous close.

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Centre may front load capital provisioning for PSBs this year, BFSI News, ET BFSI

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New Delhi, As the Central government draws a plan to privatise at least two public sector banks (PSB) this fiscal, it has also decided to front load capitalisation of state-owned banks so that the balance sheets of some of these entities are strengthened ahead of possible sale.

Sources said that PSBs may be provided this year just after their first quarter results before October. This would be a departure from the practice of previous year when bank capitalisation was undertaken late in the year and towards the end of fiscal.

Even in FY21, a substantial portion of capital was released right at end of the fiscal year in March.

“Front loading of capital will help PSBs to strengthen their financials that may again get impacted this year with weak lending and stress coming back on a lot of their credit assets with Covid pandemic continuing to disrupt businesses. This could also help in taking out weak banks out of the PCA (prompt corrective action) framework that would be helpful in their possible privatisation this year,” said an official source on the condition of anonymity.

The Budget 2021-22 has allocated Rs 20,000 crore towards recapitalisation of PSBs to help them consolidate their financial capacity.

Source said that more than two-third of this capital may be provided by the second quarter.

The government had earlier indicated that banks under prompt corrective action (PCA) framework or weaker banks would be kept out of privatisation as it would be difficult to find buyers for them. This would have left three PSBs, Indian Overseas Bank, Central Bank and UCO Bank, out of the government’s disinvestment plan.

But now the thinking is that they could be brought out of PCA as there are visible signs of improvement in some of the key parameters such as profitability and asset quality (in net NPA terms as they have stepped up provisioning) in the last 3-4 quarters. This could allow them to be considered for privatisation.

Provision of capital earlier in the year will give the necessary boost to them.

Finance Minister Nirmala Sitharaman had announced in her Budget speech this year that two state-run banks along with IDBI Bank would be privatised in FY22.

She also said that one general insurance company would be sold off in the current fiscal.

The recapitalisation roadmap is being redrawn for the PSBs in the current fiscal as the institutions are expected to face stress from the pandemic disruptions with fears that asset quality may further weaken like last year.

Also, the changes in valuation norms AT1 bonds has made the instrument less attractive for banks to raise their capital.

SEBI, though has amended the valuation rule of perpetual bonds in line with objections raised by the finance ministry, it still has said that from April 2023 onwards, the residual maturity of AT-1 bonds will become 100 years from the date of issuance of the bond. This will make the most used route of raising capital by banks less attractive.

Sources said that the Finance Ministry has already started a preliminary exercise to determine the capital requirement of banks in wake of limitations on fund raising norms and expected rise in bad assets during the time of the pandemic. Based on the inputs received by banks, additional capital may be provided to them from budgetary resources at the earliest.

On its part, government is strengthening the banking segment by merger and amalgamation of PSBs.

Since 2017, this exercise has resulted in seven large and five smaller PSBs.

The measures (based on bad loans and regional factors) were intended to help manage capital more efficiently. But emerging regulatory needs and pandemic affected businesses continue to pose challenges for banking segment.



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PSU banks headed for privatisation may get a major makeover, BFSI News, ET BFSI

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The government plans to spruce up public sector banks’ balance sheets through capital support and sale of non-core assets and trim their workforce before putting them on block.

It may also look at transferring bad loans of these lenders to the upcoming bad bank.

On the radar

The NITI Aayog, which has been entrusted with the job of identifyng suitable candidates for the privatisation, has recommended names to a high-level panel headed by Cabinet Secretary Rajiv Gauba.

Central Bank of India, Indian Overseas Bank, Bank of Maharashtra and Bank of India are some of the names that may be considered for privatisation by the Core Group of Secretaries on Disinvestment.

The other members of the high-level panel are Economic Affairs Secretary, Revenue Secretary, Expenditure Secretary, Corporate Affairs Secretary, Secretary Legal Affairs, Secretary Department of Public Enterprises, Secretary Department of Investment and Public Asset Management (DIPAM) and the Secretary of administrative department.

Following clearance from the Core Group of Secretaries, the finalised names will go to the Alternative Mechanism (AM) for its approval and eventually to the Cabinet headed by Prime Minister Narendra Modi for the final nod.

VRS scheme

Two state-owned banks being picked up for privatisation by the government are likely to come out with an attractive voluntary retirement scheme (VRS) to get rid of the extra flab.

An attractive VRS will make them lean and fit for takeover by the private sector entities that are keen to enter the banking space, the sources said.

VRS is not forced exit but an option for those who would like to take early retirement with a good financial package, the sources said adding that it has been done in the past before the consolidation of some of the PSBs.

Out of PCA?

State-owned UCO Bank is hopeful of coming out of the Prompt Corrective Action (PCA) framework very soon.

PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital, and quantum of the non-performing asset.

The bank had also met the other major criteria including net NPA norm, Goel said. Net NPA was at 3.4 per cent in March quarter against requirement of below six per cent. Return on Asset is also positive at Rs 167 crore and latest leverage ratio stood at 4.53 against a requirement of four per cent.

The government in the last round had infused Rs 14,500 crore of equity in Central Bank of India, Indian Overseas Bank, Bank of India, and UCO Bank by issuing non-interest-bearing, non-transferable bonds to these state-owned lenders.

Central Bank had narrowed its loss to Rs 888 crore in FY21, from Rs 1,121 crore in FY20. IOB, which is yet to declare its results for Q4 of FY21, posted a profit of Rs 482 crore for the nine months to December 2020, as against a loss of Rs 8,527 crore for FY20. gross non-performing asset (NPA) for Central Bank are 16.55 percent while for IOB they are 12.19 percent.



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Central Bank, IOB may be taken up for privatisation, BFSI News, ET BFSI

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NEW DELHI: The Centre may sell its stake in Central Bank of India and Indian Overseas Bank (IOB) as part of its mega privatisation initiative unveiled in the Union Budget in February.

While the two banks have been recommended for disinvestment by government think tank NITI Aayog, Bank of India (BoI) may be a potential candidate for sale, sources familiar with the deliberations told TOI.

The proposal from the government think tank is being vetted by the disinvestment and financial services departments, ministry sources said. The exercise is part of a multi-stage process for finalising entities that are to be taken up for privatisation.

While NITI Aayog has been tasked with recommending the names, it is then reviewed by the inter-ministerial group of officers and subsequently by a group of ministers, before the Union Cabinet puts its seal of approval.

Sources in the department of investment and public asset management (Dipam), which handles the government’s asset sales programme, said it will examine the proposal with the department of financial services and discuss the legislative changes needed for the privatisation of the state-run banks. “The timeline will depend on the legislative changes required,” the sources added.

Besides, the issue will have to be discussed in detail with the RBI as the law and regulations provide a special dispensation for state-run entities in several areas.

The Cabinet recently cleared the decks for the sale of government stake in IDBI Bank, but sale of the Centre’s holding in the two staterun entities will break new ground as the Narendra Modi administration has embarked on an ambitious privatisation drive, which for the first time includes the financial services space.

The government is hoping to conclude the sale of IDBI Bank stake during the current financial year.

Among the dozen staterun lenders, NITI Aayog had set its eyes on the six entities that were not part of the merger initiative a few years ago and included Bank of Maharashtra, Punjab & Sind Bank and UCO Bank in addition to BoI, IOB and Central Bank.

It, however, was of the view that the better off entities would attract greater interest, resulting in the shortlisting of IOB and Central Bank. Based on the current share price, the two entities are together valued at around Rs 44,000 crore with IOB’s market cap estimated at Rs 31,641 crore.



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IOB launches retail loans on digital platform

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Indian Overseas Bank (IOB) on Thursday announced the launch of its retail loans such as home, personal and clean loans across the bank’s digital platform. The launch was presided over by the bank’s MD & CEO Partha Pratim Sengupta.

In a press release, IOB said its retail loans are now available in IOB website, internet Banking and mobile banking app. While IOB customers can apply for these loans on any of these platforms, non-customers can apply only through the bank website.

Also read: IOB appoints EY as its digital consultant

Applicants may apply for housing loans and home loans under the PMAY schemes (subsidy linked home loans) and applicants will also have the option to switch over their home loans from other Banks to IOB, the bank said.

“On submission of the application after accepting the terms & conditions of the loan, an In-principle sanction letter having a reference number will be generated and will be intimated to applicant through SMS/e-mail,” IOB said, adding that applicants can then visit the nearest branch to avail the loan with the required documents and the in-principle sanction letter.

The branch will disburse the loan after verifying the details entered by the borrower, due diligence, appraisal of the loan and execution of documents.

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Indian banks back in British court to pursue Vijay Mallya bankruptcy order, BFSI News, ET BFSI

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A consortium of Indian banks led by the State Bank of India (SBI) was back for a High Court hearing in London on Friday in pursuit of a bankruptcy order against embattled liquor tycoon Vijay Mallya, as they attempt recovery of debt from loans paid out to his now-defunct Kingfisher Airlines.

At a virtual hearing before Chief Insolvencies and Companies Court (ICC) Judge Michael Briggs, both sides presented closing arguments in the case being heard following an amendment to a bankruptcy petition filed last year.

While the Indian banks argue a right to waive their security over the Indian assets involved in the case in order to recover their debt in the UK, lawyers for the 65-year-old businessman counter that the funds in question involved public money held by state-owned banks in India which precludes them from such a security waiver.

They also point to ongoing interest rate legal challenges in India that impact upon the applicability of a UK bankruptcy order.

“We can’t second guess what’s going to happen in India,” said barrister Marcia Shekerdemian, arguing on behalf of SBI and others.

Mallya‘s barrister, Philip Marshall, referred to witness statements of retired Indian judges in previous hearings to reiterate that there is “public interest under Indian law” by virtue of the banks being nationalised.

“Any security cannot be unilaterally waived,” he said.

Judge Briggs said he would now deliberate on the details and deliver a judgement in a timely manner, expected in the coming weeks.

The SBI-led consortium of 13 Indian banks, which also includes Bank of Baroda, Corporation bank, Federal Bank Ltd, IDBI Bank, Indian Overseas Bank, Jammu & Kashmir Bank, Punjab & Sind Bank, Punjab National Bank, State Bank of Mysore, UCO Bank, United Bank of India and JM Financial Asset Reconstruction Co. Pvt Ltd, had initiated the proceedings against Mallya in December 2018.

There have been a series of hearings in the case since then as part of their efforts to recoup around 1.145 billion pounds in unpaid loans. There have also been separate but related hearings to allow the release of court-held funds for Mallya to meet his legal and living expenses.

The businessman, meanwhile, remains on bail as the UK Home Office deals with a “confidential” legal issue in the unrelated extradition matter.

The High Court was informed earlier this year that the businessman had applied for “another route” to stay in the UK, which most likely refers to asylum and such an application would have to be addressed confidentially before UK Home Secretary Priti Patel can sign off on the court’s extradition order, on charges of fraud and money laundering related to loans acquired for Kingfisher Airlines.



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Indian Overseas Bank appoints Ernst & Young as digital consultant, BFSI News, ET BFSI

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Public sector Indian Overseas Bank has appointed Ernst and Young as its ‘digital consultant’, aimed at accelerating digitisation of banking services including assets and liability products. The move was also part of the city-based bank’s plan to ramp up its digital share in the market, a bank release said.

According to the bank’s managing director Partha Pratim Sengupta, with this new initiative, the bank is poised to attract customers who are ‘tech savvy’.

The bank is confident of providing a “hassle free and seamless banking experience” to the customers, he added.

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Indian Overseas Bank appoints E&Y as digital consultant

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Indian Overseas Bank (IOB) has appointed Ernst & Young as digital consultant to achieve the goal of increasing the share of digital services.

IOB said the consultant has been appointed as part of its growth strategy and to transform its banking services into a digitalised form.

The consultant would help the bank stay more focused on leveraging and adopting new technologies while helping in enhancing the quality of service and delivery to its customers. fe bureau

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