Also Read: Capital infusion credit positive for PSU banks: Moody's
As far as the economy goes, she says the agriculture sector is booming because of good monsoon and the sector is expected to see growth of around 30-35 percent. Services sector saw about 5-6 percent growth in the first half of the current year and going forward it is expected to be around 12-15 percent. Problem lies with the manufacturing sector which is tardy, she says.
Below is the verbatim transcript of VR Iyer's interview on CNBC-TV18
Q: The government has announced that it will infuse Rs 14,000 crore capital into the banking sector. What does it mean to Bank of India and to the banking industry in particular?
A: Government of India is a major partner in all the nationalised banks, so capital infusion is an annual exercise which is done in proportion to the growth which you exhibit, one. Second, the capital also goes in proportion to the present capital adequacy structure which we have in banking. The government is committed to ensure and see that the bank's core capital to risk assets ratio (CRAR) doesn't fall below 8 percent, so the amount of capital that is infused in the banking industry is directly proportional to the capital adequacy structure which currently the banks have and definitely this capital will help to grow further and to increase disquieted assets so that in-turn would improve net interest income and also the bottomline.
So, for Bank of India we had requested for about Rs 1,400 crore of capital as against that we got about Rs 1,000 crore. However, Rs 400 crore we will make up by doing qualified institutional placement (QIP). This infusion of Rs 1,000 crore will help the bank improve its capital adequacy by about 35 bps.
Q: What is your reading of the Indian economy? When you look at your own bank books, your customer profile, are they taking money for capex or they are taking for working capital?
A: Indian economy is battling on several fronts. Concern is there on credit growth as well as on the quality of the assets. You must divide the segment of the economy into four and if you look at the agricultural sector then definitely it is booming and with good monsoon, growth is expected to be around 30-35 percent and Bank of India also is growing at that rate.
The next segment is services sector; they are also doing alright, you can witness growth of about 5-6 percent during the first half of the current year and going forward we expect that they would improve their position to about 12-15 percent. It is the manufacturing segment which is tardy; we are not seeing much of a growth there and rightly so the businessmen are postponing and they are not going to the capex plan.
You would appreciate that the ease of doing business has become slightly less and the sentiments are not very positive for them, of course Government of India has taken many measures in the recent past especially during the last three-four months and all these measures would definitely have a favourable impact with a time lag. It takes a little bit of time and during the recent meeting which we had with the finance minister when he reviewed the functioning of the banks, it came to our notice that almost about 170 proposals, projects, new proposals have gone with these banks. So this is not as dull as we think.
Bank of India stock price
On November 14, 2013, Bank Of India closed at Rs 222.80, up Rs 10.80, or 5.09 percent. The 52-week high of the share was Rs 392.20 and the 52-week low was Rs 126.95.
The company's trailing 12-month (TTM) EPS was at Rs 52.73 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 4.23. The latest book value of the company is Rs 400.88 per share. At current value, the price-to-book value of the company is 0.56.
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