What this implies is that in case the bank does actually consider a buyback, not only would it have to seek the RBI's approval (which is mandatory for bringing about a change in its capital structure), but also have to take shareholder approval a second time, this time around for passing the resolution. IndusInd Bank is perhaps the only bank to have gone ahead with the buyback issue at its AGM even to this extent.

The amendment to the articles is significant as it indicates the future shape of things to come, when shareholders of banking companies may clamour for a buyback during longdrawn-out bearish phases as stock prices take a beating, as is happening now. For example, the Bank of India scrip, issued at Rs 45, is at Rs 20 today, while the IDBI share which was priced at Rs 130 in the primary market is languishing at around Rs 38 now. The much-fancied SBI scrip, which was Rs 250 a couple of months ago, is at the level of Rs 164.

IndusInd, which made its initial private placement at Rs 50, came out with a public issue in 1997 at Rs 95, after which the share has plummetted to the current level of Rs 23. Now that the buyback ordinance is also in place, more listed banks can be expected to go in for similar amendments.

One reason why no resolution was passed was that the IndusInd AGM was held before the buyback ordinance came into force. Passing a resolution before the ordinance became effective could have meant bringing in many cumbersome changes later since the actual provisions turned out to be very different from what was being expected. In fact, many companies are in a bind becauseof this.

Furthermore, in the case of a banking company, the hurdles are many more, as Section 20 of the Banking Regulations Act does not even permit such companies to give loans against its own shares. This is because in the event of a default in repayment, the bank's pledged shares get transferred to its name, which is tantamount to a buyback. So, the question before all banks wanting to have a buyback resolution passed will be whether the government is going to invoke these legal provisions and forbid any lowering in the capital structure of banks. Bankers feel that this is a possibility since capital adequacy is a very major issue with banks and scores over the need to improve EPS by trimmimg equity.

IndusInd Bank has an equity of Rs 160 crore, and an EPS of Rs 7. The bank's capital adequacy, as on September 30, 1998, stood at 18.03, which, senior executives state, is comfortable enough for asset growth.

Incidentally, banks, if they are allowed to go in for buybacks, will necessarily have toextinguish this portion of their equity since they would not be allowed to hold these shares as treasury stock and are not permitted trading without transfer.

The agenda at the AGM also included seeking shareholder approval amendment of articles for listing and dematerialisation. Although the bank's shares were listed in January 1997, it had gone in for the common enough practice of seeking permission and giving an undertaking to the stock exchanges concerned that the change in articles relating to listing would be implemented at a forthcoming AGM.