Chennai: State-owned Indian Overseas Bank plans to sell 5% of its shares to Life Insurance Corp. of India (LIC) if the Union government doesn’t infuse sufficient capital.
The bank said its committee of directors had decided to allot 171.2 million to the Union government at Rs97.82 each for a capital infusion of as much as Rs1,675 crore.
“If the government subscribes less than the required capital of Rs 1,675 crore, an enabling resolution has been passed to provide 5% shares to LIC,” said M. Narendra, chairman and managing director, Indian Overseas Bank.
The bank will issue 30.9 million shares to LIC at Rs97.82 each to raise Rs302.63 crore.
The Chennai-based bank’s core capital has dropped to less than 7% of its risk-weighted assets. The capital infusion will shore up its tier-1 capital to over 8%. Tier-1 capital is the core measure of a bank’s financial strength from a regulator’s point of view.
If the bank does not receive capital, it would impact its growth prospects, said an analyst on condition of anonymity.
IOB shares closed at Rs106.85, down 2.78 %, on the Bombay Stock Exchange on Wednesday. The benchmark Sensex shed 1.54%.