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

The Board of Directors of the IDBI Bank has approved a proposal of setting off its accumulated losses by April 1, 2021 in full or partially by using the balance in the securities premium account.

‘In the meeting of the Board of Directors held on Friday, February 12, they 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 Bank said that 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 added.

This is affecting the bank's plan to raise AT1 bonds in the near future, it said adding that 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.

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