Private lender IDBI Bank is seeking a go-ahead from its shareholders to raise equity capital up to Rs 11,000 crore to enhance its capacity to grow business and create buffers to absorb shocks.
There is a need to increase the capital to further strengthen the Capital Adequacy Ratio (CAR), due to ongoing implementation of BASEL III norms and consequential capital charge, bank said in notice to shareholders.
The lender is holding its annual general meeting on August 17, exclusively through video conferencing (VC) and other audio-visual means (OAVM). Its stock was trading 4.9 per cent higher at Rs 41.1 per share on BSE.
The bank is required to maintain its Tier-I capital in accordance with the relevant regulatory guidelines issued from time to time. Its capital Adequacy Ratio (CAR) stood at 13.31 per cent as on March 31, with Tier-I at 10.57 per cent and Tier-II at 2.74 per cent.
The resolution seeks to enable the bank to offer, issue and allot equity shares aggregating up to Rs 11,000 crore (inclusive of premium amount). It could resort to various ways, such as public issue, rights issue, issue on private placement basis, Qualified Institutional Placement (QIP) to raise this amount.
The special resolution passed at the last AGM held on August 20, 2019 for issuing of capital under the QIP route is valid only for one year in terms of Sebi (ICDR) Regulations.
IDBI Bank, a subsidiary of Life Insurance Corporation of India (LIC), is still under the Reserve Bank of India’s Prompt Corrective Action (PAC) regime. It was placed under PCA due to a high incidence of bad loans and weak financial profile. PCA puts curbs on lending especially to corporates and requires the bank to control costs.
The asset quality of bank showed improvement in slippage during the fourth quarter ended March 2020. The gross non-performing Assets (GNPAs) stood at 27.53 per cent in Q4FY20 as against 27.47 per cent in Q4FY19. The gross NPAs stood at 28.72 per cent at end of December 2019 (Q3FY20).
The net NPAs declined to 4.19 per cent in March 2020 from 10.11 per cent in March 2019.
Bank has achieved all PCA parameters for Q4Fy20 and except return on assets for full year (Fy20). Bank is expected is make a presentation to Reserve Bank of India based on recent performance and look for exit for PCA.