IDBI Bank board approves setting off accumulated losses against securities premium account

LIC-controlled IDBI Bank on Friday said its board has approved a proposal of setting off the lender's accumulated losses by April 1, 2021, in full or partially, by using the balance in the securities premium account.

"The Board of Directors, at its meeting held on Friday, February 12, 2021, have approved the proposal for setting off accumulated losses of the bank as on April 1, 2021 in full or to such an extent as may be possible by utilizing the balance standing to the credit of the Securities Premium Account of the Bank as on the said date," IDBI Bank said in a regulatory filing.

The settlement of accumulated losses is to happen through a scheme under the Companies Act, 2013, and subject to statutory/regulatory approvals as well as the approval of shareholders, it said.

Giving reasons for the move, the lender said the accumulated losses have wiped-off its value represented by the share capital.

"In view of the accumulated losses, the distributable items, in terms of RBI's notification dated February 2017, are negative and the bank is not eligible to make coupon payment of AT (additional tier) 1 bonds," it said.

This is affecting the bank's plan to raise AT1 bonds in the near future, it said, adding it believes reducing the share capital is the most practical and economically efficient option so as to present a true and fair view of the financial position of the bank.

Representation of true value would benefit members as their holding will yield better value and also enable the bank to explore opportunities to benefit the members, including in the form of dividend payout within a reasonable timeframe, IDBI Bank said.

"The proposal will also place the bank in a better position to achieve its turnaround plan in a time-bound manner," it added.

The lender also said it "is a balance neutral exercise and will also not affect the equity capital structure and shareholding pattern of the bank."

At end of December 2020, government holding in the bank was 45.48 per cent and LIC held 49.24 per cent, taking the collective shareholders' stake to 94.71 per cent.

The bank's public shareholding stands at 5.29 per cent. In 2019-20, IDBI Bank had posted a net loss of Rs 12,887.34 crore.