Central Bank's capital revamp plan gets nod

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The Union Cabinet on Thursday approved an equity-capital restructuring plan of Central Bank of India to strengthen its balance sheet and help raise capital at a competitive cost.

Under the plan, the bank would convert Rs 800 crore of its equity capital of Rs 1,124.14 crore into Perpetual Non-Cumulative Preference Share Capital at an annual floating coupon of 8 per cent (benchmarked to repo rate plus spread of 100 basis points). The coupon rate would be readjusted annually based on the prevailing repo rate on the relevant date.

This move would help the State-owned bank to improve its earnings per share ahead of an Initial Public Offering (IPO) expected before March-end 2007.

Advantages

"The conversion of equity is expected to strengthen the balance sheet of the bank, besides providing it with flexibility to raise capital at a competitive cost, facilitate adoption of Basel-II recommendations of capital requirement, meet its capital requirement for future growth and improve the credit rating of the bank", Mr P. Chidambaram, Union Finance Minister, told reporters after the Cabinet meeting. He also pointed out that equity-capital restructuring has been done with other banks also.

Central Bank of India was established in 1911 and nationalised in 1969.

As on March 31, 2006, the paid-up capital and Reserves and Surplus of the bank stood at Rs 1,124.1 crore and Rs 1,810.19 crore, respectively. It had staff strength of 37,241 and business turnover of Rs 1,05,677 crore as at end-March 2006.

Taken from Business Line

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