Indian Overseas Bank expects capital infusion of up to Rs 1,450 cr from government

MUMBAI: State-run Indian Overseas Bank is expecting a capital infusion of up to Rs 1,450 crore from the government by February 2012, a top official said here today.

"We have made a request to the government and will be requiring up to Rs 1,450 crore...it will come this fiscal itself," bank's Chairman and Managing Director M Narendra told reporters here.

He, however, declined to comment when asked about the route Indian Overseas Bank (IOB) will adopt for the proposed capital infusion.

Asked about the troubles its public sector peer State Bank of India is facing for getting a go-ahead for rights issue, Narendra said he is confident of getting the fund infusion "by January or February".

Country's largest lender, SBI, had initially announced its intention of raising Rs 20,000 crore through a rights issue, which would have required the government to shell out Rs 14,000 crore to maintain its stake in the bank.

IOB's core tier-I capital stood at 7.02 per cent as on September 30, and the government had earlier said that it will ensure a tier-I component of 8 per cent in all banks.

The Chennai-headquartered bank had raised Rs 1,053 crore from the government last fiscal, which saw the state's stake go up to 66 per cent.

Narendra said the earlier infusion had come in the last quarter and likewise, he expects the allocation to come in by the end of the current fiscal.

IOB reported a sluggish growth of over 1 per cent in its net profit for the September quarter at Rs 413.04 crore. Narendra attributed the slowdown in profit to higher provisioning requirements.

A majority of the total provisions of Rs 636.41 crore arose as a result of the bank migrating to the system-based NPA generation.

On the impact of the Reserve Banks's move to deregulate savings bank account interest, Narendra said the rates will definitely go up and IOB will take a call on it shortly.

The share of the cheaper CASA (current and savings account) deposits for the bank dipped to 27.46 per cent compared to 33.09 per cent a year-ago.

In order to achieve its target of taking up the CASA to 35 per cent, IOB plans to take its overall branch network to 4,000 by end of FY'13, Narendra said.

It is also planning to increase its international footprint by having a presence in 14 new geographies in a phased manner, he added.