Tag: Indian Overseas Bank

Capital infusion won’t raise tangible equity of privatisation bound banks, BFSI News, ET BFSI

Banking & Finance

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The government’s recent proposal to infuse capital in four state-owned banks through non-interest-bearing (zero coupon) bonds will improve the lenders’ capital levels, but not their tangible equity to a large extent.

The government notified that it has infused Rs 14,500 crore into four banks – Bank of India, Indian Overseas Bank, Central Bank of India and UCO Bank.

Indian Overseas Bank and Central Bank of India are reportedly among the four PSBs that are proposed to be privatised this year.

Zero-coupon bonds

A zero-coupon bond is a bond that pays no interest and trades at a discount to its face value.

Issued at a deep discount to the face value, these bonds are non-interest bearing, which means it is an investment that does not earn any returns, but depreciates in value over the years.

As these special bonds are non-interest bearing and issued at par to a bank, it would be an investment, which would not earn any return but rather depreciate with each passing year.

The bonds–with a tenure of 10-15 years–can be held by banks in the held-to-maturity category, insulating them from the impact of marked-to-market valuations.

Weak buffers

The agency said these long-tenure securities would be factored at par value rather than the discounted value in the banks’ balance sheet.

According to the agency, the four lenders have weak tangible buffers or a weaker ability to build and maintain capital buffers.

“Ind-Ra believes the intrinsic net worth of these instruments could be lower by more than 50% at the outset than similar maturity government papers in the market. The illiquid, non-trading nature of these securities could add to the discount,” it said in a release.

Tangible common equity is a measure of physical capital, used to evaluate banks’ ability to deal with losses. The long-tenor securities would be factored in at the face value and not the discounted value in the banks’ balance sheet.

Equity level

It said the proposed quantum of capital infusion varies between 11 per cent and 44 per cent of the tier-I capital of the respective PSBs as of the third quarter of the financial year 2020-21.

Equity level is an important factor in the banks’ ability to service Basel-III additional tier-I and tier-II bonds, it said.

“While the quantum of these instruments is limited in the total equity profile of most of these PSBs, the notching down for their tier-II bonds and additional tier-I bonds from the long-term issuer ratings and the standalone rating, respectively, could widen,” it said.

The first capital infusion through non-interest-bearing bonds was in Punjab and Sindh Bank (P&SB) in the third quarter of the financial year 2020-21.

The government has already allocated Rs 20,000 crore for equity infusion into PSBs in their Union Budget 2021-22.

The agency said it will continue to closely track these infusions and their impact on the banks’ franchise, adjusted networth and book value, it said.

The capital infusion

On Wednesday, the government infused Rs 4,800 crore into Central Bank of India, Rs 4,100 crore into Indian Overseas Bank, Rs 3,0000 crore into Bank of India, and Rs 2,600 crore into UCO Bank. The first such infusion was of Rs 5,500 crore in Punjab & Sind Bank in December.



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Benchmark indices starts the new financial year on a positive note; financials outperform, BFSI News, ET BFSI

Personal Finance

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Market opened with a gap up at 14798.40 following the global peers but could not maintain the higher levels and took the support near the levels of 14700. However, Benchmark indices ended with a percent gain on the first day of the new financial year supported by the metal and financials.

At close, the Sensex was up 520.68 points or 1.05% at 50,029.83, and the Nifty was up 176.70 points or 1.20% at 14,867.40. Except FMCG, all other sectoral indices ended in the green with Nifty metal index rose 5% and PSU bank index added 2.6%.

The Nifty Bank Index ended higher at 33,858 adding a good 1.66%. Amongst the top gainers were- RBL Bank at Rs 216 adding 4.17% followed by Federal Bank at Rs 78 (4.02%), Bandhan Bank at Rs 350 (3.54), AU Small Finance at Rs 1,267 (3.26%), Kotak Mahindra Bank at Rs 1,804 (2.94%), Axis Bank at Rs 713 (2.23%) and ICICI at Rs 594 (2.11%).

Nifty Financial Services ended higher at 15,909 adding over 1.23%. Amongst the biggest gainers were- Indiabulls Hsg at Rs 204 adding 4.15% followed by Bajaj Finance at Rs 5,272 (2.37%), Bajaj Finserv at Rs 9,781 (1.25%), Muthoot Finance at Rs 1,214 (0.70%), Chola Invest. at Rs 562 (0.66%) and Power Finance at Rs 114 (0.57%).

Stock in Talk
Indian Overseas Bank: Indian Overseas Bank in its BSE filing said it has received a capital infusion of Rs 4,100 crore from the government towards the contribution of Central Government in the preferential allotment of equity shares of the bank during the Financial Year 2020-21, as government’s investment

Bank of India: The bank in a BSE filling informed that Government of India has infused capital of Rs 3,000 crore in Bank of India for the purpose of preferential allotment of equity shares after obtention of shareholder’s approval in the extraordinary general meeting and other related regulatory approvals

Other key takeaways

GST collection in March 2021 at record high of Rs 1.23 lakh crore
GST Revenue collection for March’ 21 sets a new record. A new record of Rs 1,23,902 crore in form of Goods and Service Tax (GST) revenue was collected in the month of March 2021, the Ministry of Finance said on April 1.

“The gross GST revenue collected in the month of March 2021 is at a record of Rs 1,23,902 crore of which CGST is Rs 22,973 crore, SGST is Rs 29,329 crore, IGST is Rs 62,842 crore (including Rs 31,097 crore collected on import of goods) and cess is Rs 8,757 crore (including Rs 935 crore collected on import of goods),” an official release stated

Nifty futures lot size cut to 50 from 75,effective from July contracts
All monthly expiry contracts starting from the July expiry contract will have a lot size of 50. July contracts will start trading from April 30, 2021. However, according to a SEBI circular, the April, May, and June contracts will continue to have a lot size of 75. The circular also stated that the lot size of all existing Nifty long term options contracts (having expiry greater than 3 months) shall be revised from 75 to 50 after the expiry of June 2021 contracts.

Govt to infuse Rs 14,500 crore in 4 PSU banks through recapitalisation bonds
The Finance Ministry on Wednesday notified that the government will infuse Rs 14,500 crore through recapitalisation bonds in four public sector banks. The notification issued by the finance ministry said that the government would infuse capital by issuing non-interest-bearing bonds to banks.

Currency market shut today
Indian currency market will remain shut on April 1 on account of annual bank closing. On March 31, Indian rupee ended near the day’s high at 73.11 per dollar versus Tuesday’s close of 73.38.



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Government infuses Rs 14,500 crore capital into four public sector banks, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: The government has infused Rs 14,500 crore, mainly into banks that are under the RBI’s prompt corrective action framework to improve their financial health.

Indian Overseas Bank, Central Bank of India and UCO Bank are currently under this framework that puts several restrictions on them, including on lending, management compensation and directors’ fees.

Of the total infusion, Rs 11,500 crore has gone to these three banks while the remaining Rs 3,000 crore has been infused into Bank of India.

According to a government notification, Rs 4,800 crore has been provided to Central Bank of India, Rs 4,100 crore to Indian Overseas Bank and Kolkata-based UCO Bank has got Rs 2,600 crore.

The capital infusion will help these banks to come out of the Reserve Bank of India‘s prompt corrective action framework.

The fund infusion has been done through non-interest bearing recapitalisation bonds with maturity varying between March 31, 2031 and March 31, 2036.

The investment in the special securities by public sector banks would not be considered as an eligible investment which is required to made in government securities in pursuance of any statutory provisions or directions applicable to the investing bank, it said.

Most of the large state-owned lenders — including State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India, and Indian Bank — have already raised money from various market sources, including share sale on a private placement basis.

For the current financial year, the government had allocated Rs 20,000 crore for capital infusion into the public sector banks for meeting regulatory requirements.

Punjab & Sind Bank was given Rs 5,500 crore in November last year.

Separately, Central Bank of India and Bank of India informed stock exchanges about the fund infusion by the government.



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CBI carries out searches at 100 locations across 11 states, BFSI News, ET BFSI

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NEW DELHI: The Central Bureau of Investigation (CBI) on Thursday carried out nationwide searches at 100 locations in separate alleged bank fraud cases of over Rs 3,700 crore, officials said.

The coordinated search operation was spread across 11 states and pertained to 30 FIRs related to bank fraud, they said.

“These searches are part of a special drive to book fraudsters on the complaints received from different nationalised banks in India. The complainant banks include Indian Overseas Bank, Union Bank of India, Bank of Baroda, Punjab National Bank, State Bank of India, IDBI, Canara Bank, Indian Bank and Central Bank of India,” CBI spokesperson R C Joshi said.

The searches were spread across Kanpur, Delhi, Ghaziabad, Mathura, Noida, Gurgaon, Chennai, Thiruvarur, Vellore, Tiruppur, Bengaluru, Guntur, Hyderabad, Ballari, Vadodara, Kolkata, West Godavari, Surat, Mumbai, Bhopal, Nimadi, Tirupati Visakhapatnam, Ahmedabad, Rajkot, Karnal, Jaipur and Sri Ganganagar.

“It may be stated that the CBI has been receiving a number of complaints from various banks alleging cheating, diversion of funds, submission of fake/forged documents by different defaulting firms while obtaining loans/credit facilities etc,” Joshi said.

The CBI added it was receiving allegations that such firms have been turning defaulters, resulting in the loans becoming Non-Performing Assets (NPAs), thus causing heavy losses to the public sector banks.

“After scrutiny, the cases are registered by CBI. Thorough investigation is carried out in order to book the culprits, take them to face the law and endeavour to salvage public money,” Joshi said.



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S Srimathy assumes charge as executive director of Indian Overseas Bank

Personal Finance

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She also headed the corporate credit wing & international operations at Canara Bank’s head office before becoming head of Chennai circle, said IOB.

S Srimathy has assumed charge as executive director of Chennai-based public sector lender Indian Overseas Bank (IOB). Prior to this, she was serving as chief general manager at Canara Bank. She had been deputed to Nabard as chief vigilance officer immediately before her appointment at IOB.

Srimathy joined Canara Bank as a probationary officer in November 1986. She has over 34 years of banking experience across categories of branches from rural to metro, and is well exposed to various verticals like branch operations, mid & large credits, human resources and risk management. She has worked across several locations in the country.

She headed Canara Bank’s prime corporate branch at Cuffe Parade, Mumbai, for over three years. She also headed the corporate credit wing & international operations at Canara Bank’s head office before becoming head of Chennai circle, said IOB.

She was deputed to Nabard as chief vigilance officer in July 2018. During this period, Srimathy held additional charge as chief vigilance officer at New India Assurance Company, State Bank of India and Bank of Baroda, for varying periods. Srimathy holds a postgraduate degree in commerce along with a Masters in Business Administration. She is also a certified associate of the Indian Institute of Banking & Finance (CAIIB).

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S Srimathy takes over as ED at IOB

Banking & Finance

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S Srimathy has assumed charge as the Executive Director of Indian Overseas Bank. Prior to this, she served as Chief General Manager at Canara Bank. She had been deputed to NABARD as Chief Vigilance Officer immediately before her appointment to Indian Overseas Bank.

Srimathy joined Canara Bank as a Probationary Officer in November 1986. She has 34+ years of banking experience across categories of branches from rural to metro, and is well exposed to various verticals such as branch operations, mid & large credits, human resources and risk management.

She headed Canara Bank’s prime corporate branch at Cuffe Parade, Mumbai, for over three years. She also headed the corporate credit wing and international operations at Canara Bank’s head office before becoming head of Chennai Circle.

She holds a post-graduate degree in commerce, along with a masters in business administration. She is also a Certified Associate of the Indian Institute of Banking & Finance (CAIIB).

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IOB signs corporate agency pact with SBI General Insurance, BFSI News, ET BFSI

Banking & Finance

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Public sector Indian Overseas Bank has signed a corporate agency agreement with SBI General Insurance to retail its insurance products to bank customers, a top official said on Friday. Indian Overseas Bank has signed a bancassurance agreement for distribution of non-life offerings with SBI General Insurance to offer a range of general insurance solutions and innovative products to the customers of the bank.

“we are delighted to partner with one of the leading players in general insurance businesses-SBI General Insurance. We will efficiently nurture it to be a long running mutually beneficial relationship”, the bank’s Managing Director Partha Pratim Sengupta said.

The tie-up would help expand the bouquet of insurance product to customers, Gupta, who is also the CEO, said.

The partnership would improve penetration in urban, tier II and III markets and also create awareness about personal lines of insurance to customers, Sengupta said.

Indian Overseas Bank has over 3,200 branches across the country and also has a presence overseas.



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All you need to know about the potential privatisation of 4 mid-sized banks, BFSI News, ET BFSI

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Share prices of Bank of India, Bank of Maharashtra, Indian Overseas Bank and Central Bank of India rallied more than 10 percent each in early trade on Tuesday amid reports that the government may privatise these banks.

Government has shortlisted these four mid-sized state-run banks for privatisation, under a new push to sell state assets and shore up government revenues, three government sources said. Two of those banks will be selected for sale in the 2021/2022 financial year which begins in April, the officials said. The shortlist has not previously been reported.

The government is considering mid-sized to small banks for its first round of privatisation to test the waters. In the coming years it could also look at some of the country’s bigger banks, the officials said.

Bank of India has a workforce of about 50,000 and Central Bank of India has 33,000 staff, while Indian Overseas Bank employs 26,000 and Bank of Maharashtra has about 13,000 employees, according to estimates from bank unions.

PM Modi’s office initially wanted four banks to be put up for sale in the coming fiscal year, but officials have advised caution fearing resistance from unions representing the employees. The actual privatisation process may take 5-6 months to start, one of the government sources said.

To facilitate the privatisation of public sector banks, the government is likely to bring amendments to two legislations later this year. Amendments would be required in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 for privatisation, sources said.

The government hopes that the Reserve Bank of India, the country’s banking regulator, will soon ease lending restrictions on Indian Overseas Bank after an improvement in the lender’s finances that could help its sale.

“The government should consider what gives it a better pricing without compromising its long-term goal of financing the growing Indian economy,” said Devendra Pant, chief economist at India Ratings, the Indian arm of Fitch ratings agency.

(With Inputs from Reuters)



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IOB nets Rs 213 crore profit; says it’s matter of time it comes out of PCA

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IOB, which was under Prompt Corrective Action (PCA), said it has been posting profits for four consecutive quarters and almost fulfilled all the requirements to come out of the PCA.

Chennai-based public sector lender Indian Overseas Bank (IOB) on Tuesday reported a net profit of Rs 212.87 crore for the third quarter of FY21 as compared to a net loss of Rs 6,075 crore in the corresponding quarter of the previous financial year.

The bank has recorded an increase of 11.3% in its total income to Rs 5,786.54 crore as against Rs 5,197.94 crore. IOB, which was under Prompt Corrective Action (PCA), said it has been posting profits for four consecutive quarters and almost fulfilled all the requirements to come out of the PCA.

Speaking to media persons after releasing the earning performance, through virtual mode, Partha Pratim Sengupta, MD & CEO, IOB, said the bank plans to come out of PCA by focusing on recovery, low-cost deposits and less capital consuming advances.

“For the last four quarters, we have been making profit consistently. When compared with Q3 performance of FY20, there was a marked improvement in all key parameters. It is a matter of time for us to exit PCA and is up to the regulator to decide,” he said.

IOB had received a capital infusion of over Rs 8,000 crore in two tranches during the last two quarters of the last financial year, which helped the loss-making bank restart the business with a clean slate. Coupled with recovery and asset-light advances, the bank could achieve profits during the last four quarters.

The MD said there has been perceptible change in NPA levels achieved through recovery measures.

“Currently, the bank has a carry forward loss of Rs 17,500 crore. Our aim is to recover at least Rs 1,000 crore per quarter. In the first quarter of FY21, we recovered about Rs 200 crore due to lockdown, followed by Rs.760 crore and Rs 1,055 crore, respectively. Going forward, the focus will be on recovery in excess of Rs 1,000 crore and it will add to our bottom line,” he said.

According to him, IOB has evolved a policy of not taking fresh exposures in stressed sectors while the bank had exited from accounts in the stressed sectors, wherever feasible.

During the quarter, gross non-performing assets (GNPAs) reduced to Rs 16,753 crore from Rs 23734 crore and stood at 12.19% as against 17.12% and net NPA was contained at Rs 3,905 crore, as compared to 7,087 crore, which was 3.13% as against 5.81%. The provision coverage ratio improved to 91.91% from 86.20%.

While interest income contracted to Rs 4,244 crore from Rs 4,352 crore, other income rose 82.36 % to Rs 1,542.82 crore. Net interest margin stood at 2.45%.

He said around Rs 18,000 crore worth NPAs are awaiting NCLT’s resolution, while Rs 3,000 crore assets was expected to be restructured.

IOB had board’s approval to raise up to Rs 5,500 crore capital. He said the bank needed only Rs3,000 crore and the timing of the issue will be decided at a later date.

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