Bank of India plans to raise about Rs 3,700 crore by March-end

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26 Aug, 2025 12:21

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Moneycontrol BureauBank of India plans to raise about Rs 3,700 crore by the end of March 2017, according to Chief Executive Melwyn Rego. During the next two months, "the bank plans to raise about Rs 1,000-1,500 crore by issuing Additional Tier-1 (AT-1) bonds and an equal amount by issuing Tier-2 bonds," Rego said in a post results interaction.

Posting a profit of Rs 102 crore in its third quarter ending December 2016 from a loss of Rs 1,506 crore in December quarter in 2015, the state-run bank has seen reduction in bad loans with improvement in recoveries and upgradation.

However, the profit was marginally lower from Rs 127 crore in the September quarter.

The bank has already received Rs Rs 1,338 crore of the government’s Rs 1784 crore planned infusion. The remaining Rs 446 crore will be raised by the end of this quarter.

In addition to this, the bank plans to sell its non-core assets — real estate, stake sale in subsidiaries or other assets — to raise about Rs 250- 300 crore.

Bank of India has already raised Rs 495 crore in the September quarter through an 18 percent stake sale in its life insurance subsidiary to Star Union Dai-Ichi Life Insurance.

Bank of India expects that capital will help it increase its capital adequacy ratio (CAR) significantly to meet the Basel III requirement.

CAR is a measure of a bank's financial strength based on the ratio of the bank's capital to its risk weighted assets.

At present, Bank of India's CAR stands at 12.11 percent, a drop from 12.50 percent in the previous quarter. It increased from 11.28 percent in the December quarter a year ago. Though well within the comfort level of Basel III requirement of CAR at 9 percent and Tier-1 at 7 percent, all banks require more capital for their business growth over and above the norm.

According to ICRA rating agency, public sector banks' capital requirements is in the range of Rs 1.5-1.8 lakh crore till FY19 of which only Rs 65,000 -75,000 crore can be by way of AT-1 issuances.

With a consistent decline in slippages in the last one year, improvement in gross NPAs and recoveries with no incremental slippages expected the bank chief states that the bank is "on the cusp of a turnaround".

Rego said the credit growth for Bank of India would be about 5-6 percent for the year ending March 2017.