Bank of India board OKs fund raising via share sale

State-run Bank of India's board has approved raising funds by selling shares that would be worth up to USD 1.7 billion based on Wednesday's closing price.

The lender plans to issue up to 180 million new shares through a rights issue, public offer, sale to institutional investors or issue of depository receipts, it said in a statement to the Bombay Stock Exchange, without giving further details.

Senior bank officials were not immediately available for comment.

Ahead of the announcement, Bank of India's shares, valued at USD 5.1 billion, ended up 1.5% at Rs 428.3 in a weak Mumbai market.

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Earlier this month, another state-run lender, Indian Bank, told Reuters it planned to file initial papers for a follow-on public offer in the second week of July and hopes to hit the market by the end of August or early September.

In March, Canara Bank raised USD 443 million by selling shares to institutional investors.

Several Indian lenders have put their plans for domestic debt raisings on the backburner, deterred by surging interest rates. They are waiting for borrowing costs to soften before hitting the market, while some may tap the equity markets instead, banks and analysts said.

The Reserve Bank of India has raised key policy rates nine times since March 2010, including the larger-than-expected 50 basis points hike in its annual monetary policy statement on May 3, to curb sticky inflation.

Several lenders including State Bank of India, Yes Bank, Union Bank and Indian Bank have said they were wary of tapping the Indian debt market and were scouting for other avenues including share sales. (USD 1 = Rs 45.215)