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Central Bank of India, IOB to raise additional capital

LiveMint logoLiveMint 12-06-2014 Anup Roy

Mumbai: Two public sector banks said on Thursday they will raise money from the government, or issue shares to Life Insurance Corp. of India (LIC) to get additional capital this fiscal year.

While Mumbai-based Central Bank of India said its board approved raising additional capital by issuing 71 million shares to LIC on a preferential basis, Chennai-based Indian Overseas Bank said it will issue shares to the government to raise `3,500 crore.

Both the banks made these announcements through notifications on the exchanges.

As the cash-strapped government struggles to infuse capital to the banks it owns, LIC has time and again come to the rescue of state-owned banks, subscribing to their share issuances.

In February, LIC picked up 41.3% of State Bank of India’s `8,000 crore share-sale to institutions.

Going by Central Bank’s share outstanding figure, LIC will be picking up a 5% stake in the bank. It already holds 5.44% in Central Bank of India. As of 31 March, the government held 88.63% in Central Bank.

Indian Overseas Bank said it has requested the government to infuse capital worth `3,500 crore to raise its core capital to adhere to the latest international accounting norms.

On 31 March, IOB’s core capital adequacy ratio was 7.47%, against the Basel III requirement of 8%.

The bank said it will issue shares to the government to raise the capital, but in case there is a shortfall, the bank’s board has given it the permission to raise up to `1,200 crore by selling shares to institutional investors.

Shares of Central Bank of India lost 0.43% to `80.35, while Indian Overseas Bank’s shares shed 0.53% to `84.90. The benchmark Sensex closed at 25,576.21 points, up 0.40%.

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