Indian Bank expects to issue 6.4 crore shares of Rs 10 each for its follow-on public issue. With clearance from the Government, the Bank expects to hit the capital market in August or September.

Mr T.M. Bhasin, Chairman and Managing Director, Indian Bank, told Business Line that the share premium of the issue would be decided after due diligence by the merchant bankers and legal consultants. With the FPO, the Government holding will be diluted by 10 per cent, to 70 per cent. This 10 per cent will be open for retail investors. The red herring prospectus is expected to be filed with SEBI during the first week of July.

With funds raised from the FPO, the Bank plans to shore up its capital and expand its credit growth. Indian Bank expects to expand its credit by Rs 12,000 crore. As on March 31, 2011, the Bank's capital adequacy ratio was at 13.5 per cent. The shares of Indian Bank closed at Rs 230.85, down 0.97 per cent on the BSE on Wednesday.

Indian Bank expects its net interest margin (NIM), a measure of profitability, to be impacted by 20 basis points. NIM was at 3.7 per cent as on March 31. The Reserve Bank of India on Tuesday raised savings bank deposits by 50 basis points to four per cent. The regulator had also mandated banks to increase provisioning on doubtful assets, sub-standard assets and restructured assets in its announcement on May 3.

Savings bank deposits

The Bank had garnered about Rs 24,000 crore through SB accounts in 2010-11. “We would go ahead and raise another Rs 6,000 crore to Rs 30,000 crore in the current financial year,” he said. An increase of 50 basis points on SB accounts would see an outgo of additional Rs 150 crore. The Bank paid about Rs 1,050 crore as interest payment on SB accounts in 2010-11.

Provisions on bad loans

In the Monetary Policy, the RBI had brought in changes in the norms for provisioning, basically increasing provisions. Indian Bank expects to set aside of Rs 60 crore on account of the changes, Mr Bhasin said.

social-fb COMMENT NOW