Indian Overseas Bank (IOB), a major public sector bank in India had requested capital support from the government. A top official of the bank said that the state-owned lender is expecting an approximate amount of Rs 1,000 crore from the government to create a buffer for meeting any contingencies.
P P Sengupta, Managing director of IOB commented that the bank seeks to strengthen its capital through profit. Capital support from the government will be used for meeting contingencies. He added that the bank would continue to have book profit in the coming quarters also and the request made for capital support is for less than 1000 crore. The profit accumulated for the entire financial year will boost the capital adequacy ratio, which was 10.9 percent at the end of September.
For the second quarter of the current fiscal year, the bank reported a profit of Rs 148 crore with an increase of 22.3 percent from Rs 121 crore in the previous quarter. The bank registered a net loss of Rs 2,254 crore in the same period a year ago. The Chennai headquartered lender has reported profits for the third consecutive quarter and is all set to continue the trend.
Parliament in the monsoon session had approved the infusion of Rs 20,000 crore in public sector banks (PSBs) in the first batch of Supplementary Demand for Grants for 2020-21. In 2019-20, the government infused Rs 70,000 crore capital into PSBs of which IOB receives Rs 4,360 crore.
The bank expects to bring down its NPAs in the second half of the fiscal year by Rs 2000 crore. In the quarter that ended, the bank showed substantial improvement in asset quality, with gross NPAs falling 13.04 percent of gross advances, compared to 20 percent at the end of September 2019. In terms of value, gross NPAs dropped to Rs 17,659.63 crore compared to Rs 28,673.95 crore a year ago and net NPAs decreased to Rs 5,290.60 crore (4.30 percent) from Rs 12,507.97 crore (9.84 percent).
In an earlier statement, Sengupta said that his primary focus is to strengthen the balance sheet and to be profitable in the coming two quarters. The bank has got approval from the board to raise Rs 5,000 crore capitals from the market, but there is no plan of raising funds in the third quarter. He added that the bank is clearly on the right track on strengthening the balance sheet. The profits have risen despite the increased provisions. The bank has made adequate arrangements, including the COVID-19 provision for Rs 682 crore, which accounts for 5 percent of the loan portfolio.
