IDBI Bank board meets today to discuss capital raising

Reeling under huge losses, public sector lender IDBI Bank’s board is meeting on Tuesday in Delhi to consider capital-raising plans, especially from the government, to meet regulatory norms by March 2017.

The government has maintained that the bank is in line for strategic divestment, in which the institutional investor will infuse fresh capital.

The International Finance Corporation and another multilateral agency had done the due diligence on the bank’s books but things have not moved ahead.

Top executives of the bank said it had made huge losses in 2015-16 and this year was also going to be tough. So there is little or no room for internal equity capital generation. The common equity tier-I capital requirements under Basel-III will grow only by March 2019.

The bank has been in discussion with the government on the capital infusion plan. But it is yet to hear anything concrete from the finance ministry, officials added. Stressed asset quality and the resultant high credit costs have strained IDBI Bank’s earnings. The bank reported losses of ~3,660 crore in financial year ended March 2016 and ~1,906 crore in the first nine months of financial year 2017. Its gross non-performing assets (NPAs) stood at 15.16 per cent at the end of December 2016, up from 8.94 per cent a year before.

The capital adequacy ratio (CAR) was at 11.29 per cent with tier I of 8.52 per cent in December 2016. The CAR was at 13 per cent with tier I at 8.71 per cent at the end of December 2015. Last week, the bank had informed the stock exchanges that its board would meet on February 21 to tentatively consider fund raising by way of preferential issues of shares or any other method.