State-run Canara Bank will raise up to Rs 5,000 crore equity capital through various modes in the current fiscal year to boost its capital adequacy ratio in view of expansion plans, and will seek nod from shareholders for the same in its AGM next month. In view of certain expansion plans of the bank, the implementation of Basel III norms, and consequent capital charge, there is a need to increase the capital to further strengthen the capital adequacy ratio, Canara Bank said in its annual report for 2019-20.
The bank will seek shareholders' nod at the annual general meeting (AGM) to be held on August 10 through audio/visual means in view of the coronavirus pandemic.
The Bengaluru-headquartered lender, which amalgamated Syndicate Bank into itself with effect from April 1, 2020, has Rs 1,030.23 crore as equity capital currently and its capital adequacy ratio stood at 13.65 percent as on March 31, 2020, well above the regulatory requirement of 10.875 percent.
"In order to shore the bank's tier I capital, the Board of Directors of the bank have decided to raise capital to the extent of Rs 5,000 crore through various modes including Follow-on Issue, right issue, preferential issue to government and financial institutions, Qualified Institutional Placement (QIP) and other permitted mode of raising capital," Canara Bank said in the annual report for FY20.
In its previous AGM in July 2019, the bank had sought permission from shareholders for raising up to Rs 6,000 crore as fresh equity capital through various means including a QIP.
However, the bank said it did not raise capital through any of the modes approved by the shareholders, while the government infused equity capital worth Rs 6,571 crore in lieu of preferential allotment of shares on December 4, 2019.
In his message to shareholders amidst the global pandemic, Managing Director & CEO L V Prabhakar said the outlook at this juncture remains uncertain given the depth of economic implications of the ongoing pandemic wave.
"Notwithstanding, the monetary and fiscal efforts of the RBI and the central government shall yield desired results once the pandemic is contained. Thus, we are hopeful of recovery by the second half of the current fiscal with easing restrictions and commercial activities resuming to full swing," Prabhakar said.
Going ahead, he said the bank aims to improve the bottomline with balanced thrust on retail, MSME and corporate advances coupled with increased adoption of digitalization for efficiency improvement.
"In the coming years, the bank looks forward for leveraging amalgamation benefits for maximizing the efficiency and productivity," Prabhakar added further.
In 2019-20, Canara Bank posted a net loss of Rs 2,236 crore on account of increase in provisions.
The bank said its consistent focus helped in improving asset quality during the last fiscal year ended March 2020 as gross non-performing assets (NPAs) or bad loans fell to 8.21 per cent as on March 31, 2020 from 8.83 per cent a year ago. The net NPA reduced to 4.22 per cent from 5.37 per cent.
Giving an overall picture of the banking industry, Canara Bank said Scheduled Commercial Banks' (SCBs) deposit growth stood at 7.93 per cent year-on-year, while credit growth decelerated to 6.14 per cent in 2019-20 as against 10.04 per cent and 13.29 per cent in the fiscal ended March 2019, respectively.
"It is expected that the credit growth will remain tepid in the current fiscal as well, while deposit growth is picking up due to change in consumer behaviour who is treading cautiously on the expenditure side to save the earnings due to uncertain future," it added.