IDBI Bank seeks nod to mop up 11,000 crore

Private lender IDBI Bank is seeking approval from its shareholders to raise equity capital up to ~11,000 crore in a bid to enhance capacity to grow its business and create buffers to absorb shocks.

There is a need to increase the capital to further strengthen capital adequacy ratio (CAR), due to the ongoing implementation of BASEL-III norms and consequential capital charge, the 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. Its stock closed the trading session 1.9 per cent higher at ~39.9 per share on the BSE.

The bank is required to maintain its tier-i capital in accordance with the relevant regulatory guidelines issued from time to time. Its 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 ~11,000 crore (inclusive of premium amount). It could resort to various ways, such as public issue, rights issue, issue on private placement basis or qualified institutional placements (QIPS) to raise this amount.

The special resolution passed at the last annual general meeting held on August 20, 2019, for issuing 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 a bank to control costs.