A senior bank official has stated that Indian Overseas Bank proposal to set off accumulated losses by accumulating into share premium account was approved the board without any objection.
The state-owned Bank, under Reserve Bank of India's Prompt Corrective Action, in an anomalous move, witnessed worsening of the asset quality, last week, thus, cleared the proposal to set off accumulated losses of approximately Rs 6,800 crore by using its share premium account balance of Rs 7,650 crore.
Indian Overseas Bank’s Chief Executive Officer, R Koteeswaran stated: "It was a unilateral board decision.”
The government holds 82 per cent shares in IOB with LIC owning another 9 per cent. Interestingly, a similar move by Global Trust Bank back in 2001 was shot down by regulators.
Mr. Koteeswaran reported: "That was for the reason that they were under the Companies Act while we are under the RBI Act. The courts have viewed them under various provisions. In our case, we’re well within our rights to do it. The board representatives of the government and the Reserve Bank of India have also cleared the move.”
Earlier, Corporate governance watch firm InGovern accused the Bank of using shareholders money to gear up crony capitalism.