Chennai-based public-sector lender Indian Overseas Bank (IOB) on Monday said the proposed move to utilise the share premium account balance to set off the accumulated losses is to right-size the balance sheet as well as adopt best corporate governance, which will help give stakeholders clarity about the financials of the bank. The bank clarified that the move will not impact its equity capital structure. On the benefit side, IOB would be in a position to declare dividends sooner, with a clean balance sheet, as the bank had posted 29% growth in operating profit in the second quarter. Talking to mediapersons here, R Subramania Kumar, managing director and CEO, IOB, said the exercise is being carried out to provide stakeholders a true and clean picture of the balance sheet. The move is the extension of the turnaround strategy it had adopted after the RBI put the bank under watchlist, following accumulation of bad assets.
Clarifying on some specific issues, Subramania Kumar said the bank’s liability and commitment before and after the cleaning of the balance sheet will remain the same. “This act of ours is only to provide an exact picture of the balance sheet to the existing investors to understand the position and to the future investors, especially the minority shareholders, to take a very well informed decision about the bank,” he said. Kumar also said the recovery of the bank has doubled, which proves that arresting of the slippage and increasing of the recovery has worked according to the bank’s turnaround strategy. “Recovery does not stop with corporate accounts and other accounts,” he added.
The board of directors of IOB had on last Thursday approved utilisation of the balance available in the share premium account amounting to Rs 7,650 crore to set off the accumulated losses of the bank to the tune of Rs 6,979 crore. The bank has convened an extraordinary general meeting (EGM) of shareholders on Tuesday, January 30, 2018 in Chennai for obtaining their.
IOB had reported a net loss of Rs 1,222.50 crore for the second quarter as against a net loss of Rs 765.13 crore in the same quarter last fiscal. The bank, which has been plagued by mounting bad assets for quite a long time now, attributed the widening of net loss to increase in the provision by 23.6% over September 2016 with the quantum of additional provision made rising to `985.04 crore during the September 2017 quarter.
The total income of the bank for Q2, FY18 stood at Rs 5610.35 crore as against Rs 5961.62 crore, in the same quarter last fiscal, a decrease of 5.89%. The gross NPA stood at an alarming Rs 34,708.59 crore with a ratio of 22.73% as against Rs 34,724.12 crore with a ratio of 21.77%. The net NPA was at Rs 18,949.55 crore with a ratio of 13.86% as compared to Rs 20,765.31 crore with a ratio of 14.30%.