The paring of the capital base will help the bank achieve higher earning per share (EPS). Bank of India chairman KV Krishnamurthy said the bank gave the cheque to the Reserve Bank of India (returning the capital) on Saturday.
In the beginning of the financial year 2001-02, the bank had written to the Centre about returning the capital on the plea that it will lead to improved shareholder value. By returning the capital, the bank would be able to service the leaner capital better.
The bank's scrip attracted buying interest in the last couple of weeks on account of reports that the government had given its green signal for returning the capital. In fact, it has been going up since January 2002.
BoI had plans to return Rs 300 crore, but a contentious provision, which was incorporated in 1995, in the Banking Companies (Acquisition and Transfer of Undertakings) Act prevented it from doing so.
As per provisions of the said Act, the paid-up capital of a public sector bank should not drop below 25 per cent of its capital from the day the amendment to the Act was passed.
In the case of BoI, its capital, when the provision was incorporated, stood at Rs 1,952 crore (including losses carried forward and not written off). Hence, BoI's capital, technically, cannot drop below Rs 488 crore at any given point of time.
Recently, the Centre had accepted Vijaya Bank's plea for returning capital amounting to Rs 125 crore in three tranches beginning this financial year.
