Indian Overseas Bank plans to raise funds through FPO in next fiscal

Indian Overseas Bank (IOB), whichhas been in the red for the last four-and-a-half years, is mulling to raise funds through a Follow-on Public Offering (FPO) next year, a senior official of the state-owned lender said here on Monday.

Ajay Kumar Srivastava, Executive Director IOB, said that the FPO idea was still "at the drawing board level" and the Board would take a decision on the quantum of funds to be raised and the percentage of stake to be diluted.

The centre holds nearly 95 per cent stake while LIC has three per cent and others-two per cent in the bank, which is currently under the Prompt Corrective Action (PCA) framework of the Reserve Bank.

 

Raising money from public is on the cards. We plan to do it in the second or third quarter. We will go to the market with FPO.

First we have to go to our Board, we have to go to RBI and SEBI also ( for necessary approvals).

It is on the drawing board, but nothing has been concretised. But it is in our action for next year, he told reporters at a press conference here.

The centre recently increased IOB's authorized capital from Rs 10,000 crore to Rs 25,000 crore.

The Government also infused Rs 4,360 crore capital into the bank.

He said the Chennai-based lender is in the process of improving its performance in terms of controlling Non- performing Assets (NPA) and Net Interest Margin (NIM).

The banks NIM is currently at about 1.94 per cent and is expected to touch two per cent during the current quarter.

"It would take another three of four quarters to touch the three per cent-NIM... We will prefer to go for FPO after we come out of PCA, he said.

The Reserve Bank of India's PCA framework, which intends to nurse financially weak banks back to health, restricts lending and expansion of lenders.

Srivastava said going forward the focus of the credit would more for MSMEs and wants to be recognized as "MSME- focused bank".

He said currently the exposure to the sector is Rs 31,000 crore and efforts are on to take it Rs 50,000 crore in the next 18-24 months.

IOB also classified 200 of its branches as "MSME- focused".