http://www.moneyspidery.com/2012/02/11/bank-of-maharashtra-to-dilute-5-of-its-equity-to-lic/
The government-owned bank has decided to issue shares to LIC before
the end of this fiscal. Post-share sale, LIC’s stake in the bank will
increase to more than 11%.
Bank of Maharashtra’s tier I capital – reserves and equity – is 7.6% and following infusion of capital by LIC it will cross 8% – the basic minimum that government desires in PSU banks.
“We also expect the government to infuse Rs 860 crore in the bank sometime soon,” said a bank official who did not want to be identified. Last year, the government had invested Rs 1,000 crore in the bank. Shares of BoM rose 2% to Rs 56 at the Bombay Stock Exchange (BSE).
Widening fiscal deficit has prompted the government to approach LIC to invest in government-owned banks – a move which will help the government trim expenses and yet retain control over banks.
The government had targeted fiscal deficit – difference between income and expenses – at 4.6% of gross domestic product (GDP) for the current fiscal, but many fear it would cross 5% as the government failed to raise money by way of divesting its stake holding in state-owned companies.
Dena Bank was among the first bank to announce decision to dilute equity in favour of LIC. The insurance company would be acquiring a 5% stake for an investment of around Rs 125 crore and the transaction would be complete by end of this fiscal.
LIC’s stake in Dena Bank will increase to little over 11% after the bank issues shares on a preferential basis to the insurer. However, the government’s stake would fall to 55%, which is below the 58% threshold limit they prefers to hold in state-owned banks.
MUMBAI: Bank of
Maharashtra (BoM) will sell shares worth about Rs 100 crore to India’s
life insurance leader Life Insurance Corporation (LIC), diluting 5% of
its equity that will help the public sector bank improve the capital
position enabling it to lend more.
Bank of Maharashtra’s tier I capital – reserves and equity – is 7.6% and following infusion of capital by LIC it will cross 8% – the basic minimum that government desires in PSU banks.
“We also expect the government to infuse Rs 860 crore in the bank sometime soon,” said a bank official who did not want to be identified. Last year, the government had invested Rs 1,000 crore in the bank. Shares of BoM rose 2% to Rs 56 at the Bombay Stock Exchange (BSE).
Widening fiscal deficit has prompted the government to approach LIC to invest in government-owned banks – a move which will help the government trim expenses and yet retain control over banks.
The government had targeted fiscal deficit – difference between income and expenses – at 4.6% of gross domestic product (GDP) for the current fiscal, but many fear it would cross 5% as the government failed to raise money by way of divesting its stake holding in state-owned companies.
Dena Bank was among the first bank to announce decision to dilute equity in favour of LIC. The insurance company would be acquiring a 5% stake for an investment of around Rs 125 crore and the transaction would be complete by end of this fiscal.
LIC’s stake in Dena Bank will increase to little over 11% after the bank issues shares on a preferential basis to the insurer. However, the government’s stake would fall to 55%, which is below the 58% threshold limit they prefers to hold in state-owned banks.
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