The Hindu Business Line : Indian Bank to gain from SLR status to recap bonds

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Chennai Feb. 16 The decision of the Reserve Bank of India to give `SLR status' to recapitalisation bonds given by Government to various banks, will help Indian Bank immensely, because the bank sits on a huge pile of such bonds, worth about Rs 3,800 crore.

Indian Bank would not need to make any statutory investments in Government securities for additional deposits up to Rs 15,000-odd crore. This is a big help when there are concerns over liquidity, because the bank could use all its incremental deposits for lending, rather than put a quarter of it in government securities.

Gains from IPO

In any case, Indian Bank says it has no liquidity problem. Sources in the bank said the bank had meticulously "stayed liquid" and today it is so aflush with funds that the bank is a lender in the call money market.

This fortnight in particular, the bank is wallowing in liquidity, having got over Rs 4,000 crore of float funds thanks to its recent IPO. The money will be with Indian Bank for about 12 days and, even at a conservative earning opportunity of 6 per cent, the bank will make Rs 8-10 crore profit out of the funds.

The 4.64 crore shares reserved for `qualified institutional buyers' were oversubscribed 56 times. It is learnt that 28 FIIs and two large Indian public sector companies applied for the full quote of 4.64 shares.

The portion reserved for `retail investors'— 2.32 crore shares— was subscribed a little over three times.

DP account

The IPO has resulted in another favourable consequence, perhaps one that was never aimed for. In the last about 15 days, over 16,000 new DP (depository participant) accounts have been opened with the bank, though most of them from its own employees who were eager to apply for the bank's shares against the employee quota.

The bank got its DP licence only a year back and until the IPO, had only about 500 DP accounts. `DP' is a fledgling business for the bank. While how many of the new accountholders will be active traders is a question, the rush of new accounts has given the new business a leg-up, sources in the bank say.

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