Indian Overseas Bank, which has the second largest non-performing assets ratio in the banking sector, has decided to wipe out its accumulated losses with its share premium of Rs 7,650 crore.
In a notice to the stock exchanges, IOB said that its board has approved the utilisation of “the balance available in the share premium account amounting to Rs 7,650.06 crore as at 31.3.2017 to write off accumulated losses of the bank aggregating to Rs 6,978.94 crore ...”
IOB, which has more than a fifth of its loans gone bad (22.73 percent), said this move would help present a true and fair picture of the bank’s accounts.
The board decision will be put to vote at an extraordinary general meeting on January 30 at Chennai.
This move of IOB will not have any impact on the government’s shareholding in the bank but will likely help the bank get rid of the past loss burden with a fresh start with the better capital levels.
As of the end of the September 2017 quarter, the bank had a gross non-performing ratio of 22.73 percent. During the same quarter, the bank reported a loss of Rs 1,222 crore.
After rapid growth between 2010-2013, the government-owned bank witnessed surge in its bad loans and losses.
The bank has also been under the Reserve Bank of India’s Prompt Corrective Action (PCA frameork) since the October 2015 quarter, among the first of the now 11 banks to face the action.
Stock of Indian Overseas Bank closed 2.89 percent up at Rs 23.15 on BSE.
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