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The Centre will subscribe to equity shares worth ₹4,100 crore in state-owned Indian Overseas Bank (IOB). The equity shares are proposed to be issued to the Centre on a preferential basis for the capital infusion of ₹4,100 crore received by the bank in FY21, sources said.
The transaction should be seen as one where the Centre was enabling regulatory capital for the public sector bank as of March-end 2021. To enable this, government issues bonds to be subscribed by the bank and, the Centre, in turn, makes equity capital contribution in the bank for the same amount. This will be a cash-neutral exercise with no outgo for the Centre, while at the same time beefing up the capital of the public sector bank, sources added. There is no benefit for the bank except the colour of the capital and the fact that bank will be in conformance to regulatory requirements.
The Centre has done a similar exercise to support a few other weak banks such as Bank of India and UCO Bank, it is learnt. Currently, the Centre holds little over 95 per cent stake in IOB.
EGM on May 12
An extraordinary general meeting of the shareholders has been convened on May 12 through VC/OAVM mode to approve the preferential allotment of equity shares to the Centre, sources said.
For the preferential allotment, IOB proposes to allot 246.54 equity shares of face value of ₹10 each at issue price of ₹16.63 per equity share (including premium of ₹6.63 per equity share) to the Central government.
Similarly, the Centre proposes to subscribe to 42.14 crore equity shares worth ₹3,000 crore in Bank of India through preferential allotment route at a price of ₹71.23 per equity share. The virtual EGM of shareholders has been convened for May 5, sources said. Currently, the Centre has 89.10 per cent shareholding in Bank of India.
In the case of UCO Bank, the Centre will subscribe through preferential allotment as many as 203.76 crore equity shares worth ₹2,600 crore at a price of ₹12.76 per share, sources said. The virtual EGM of shareholders has been convened for May 7. The Centre currently holds 94.44 per cent stake in UCO Bank.
The capital raised by these banks through this route would be utilised for the purpose of shoring up of common equity and Tier-I capital of the bank, sources said.
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