The Hindu Business Line : Indian Bank’s recap bonds swapped for SLR securities

Chennai, Aug 9 Recapitalisation bonds worth Rs 3,150 crore, part of the stock of bonds that Indian Bank received from the Government of India between 1998 and 2003, have been swapped for other government securities that qualify as ‘SLR securities’.

Indian Bank’s Chairman and Managing Director, Mr M.S. Sundararajan, told Business Line today that the swapping happened a few days ago.

There are both positive and negative implications of this. On the negative side, the new bonds carry a lower rate of interest. Indian Bank will lose Rs 24 crore of interest income annually.

On the positive side, Indian Bank need not make the mandatory investments in SLR securities for Rs 12,600 crore of incremental deposits (four times Rs 3,150 crore). The deposits can be fully utilised for lending. The bank will earn more when the money is used for lending.

More importantly, the bank would additionally have Rs 3,150 crore of securities for trading. If interest rates fall, as is anticipated, the consequence will be a rise in the market value of securities — a potential source of profits.

Mr Sundararajan said that the bank had 36 per cent of its deposits in SLR securities, as against the statutory minimum of 25 per cent.

This is the second time that the bank is swapping its recapitalisation bonds for SLR securities. Earlier, recap bonds worth Rs 420 crore were swapped. Recap bonds worth another about Rs 1,000 crore still remains to be swapped for SLR bonds.

Meanwhile, Indian Bank today announced that it would hold a two-day National Banking Conference and Research Seminar on ‘Managing Next Generation Banking’ in Chennai on Friday and Saturday.

The keynote address is to be delivered by Ms Usha Thorat, Deputy Governor, RBI. Other speakers include Mr M.B.N. Rao, Chairman and Managing Director of Canara Bank, Dr K.C. Chakrabarty, Chairman and Managing Director, Punjab National Bank, Mr K. Ramakrishnan, Chairman and Managing Director, Andhra Bank, Mr S.A. Bhat, Chairman and Managing Director, Indian Overseas Bank, Dr Mridul Saggar, Director (Financial Markets), RBI, Mr U.K. Sinha, Chairman and Managing Director, Unit Trust of India, and Mr R. Ravimohan, Managing Director, Crisil.

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