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Banks working to strengthen capital buffer to counter coronavirus-induced shocks: Report

Private banks may sell shares to raise a cumulative Rs 35,000 crore

April 30, 2020 / 11:54 AM IST

Private banks may sell shares to raise a cumulative Rs 35,000 crore to build a buffer against the economic shocks due to the coronavirus pandemic.

Bank of Baroda, RBL Bank, IndusInd Bank, Yes Bank, Kotak Mahindra Bank and IDFC First Bank are looking to build a “capital base” against the economic effects of COVID-19. RBL and IDFC First plan to raise between Rs 1,800-2,000 crore each, sources told Mint.

IDFC First Bank will reportedly use the capital for “strengthening the bank’s capital buffers further and for growth”.

Moneycontrol could not independently verify the report.

RBL Bank is also said to be looking to add growth capital and strengthen its capital position.

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“The capital raising may happen when the share price goes up. The money can be used for consolidation such as acquisitions or mergers, apart from improving the bank’s tier 1 capital further," sources told the paper.

Over the past weeks, these banks have made plans to issue fresh shares to enhance common equity tier 1 (CET 1) capital, it added. CET 1 is used to measure a bank’s capability to bear loan losses and write-offs, and also measure cash reserve for acquisitions or infusions.

The lockdown to combat the spread of the virus has made it difficult for borrowers to repay loans and could increase slippages and loan write-offs in the September quarter. The second phase of the country-wide lockdown is scheduled to be lifted in phases from May 3.

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Moneycontrol News
first published: Apr 30, 2020 11:51 am

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