Bank of India will maintain CAR above stipulated levels: CEO

Bank of India will maintain its capital adequacy ratio (CAR) above stipulated levels and the bank will look for more options to raise capital, says BP Sharma, MD and CEO of the bank.

His comments came after the central government announced on Tuesday its decision to infuse capital worth Rs 1,150 crore into the bank by way of preferential allotment of shares.

Slippages in non-performing assets (NPA) will come down in the fiscal year 2017 and the bank is trying to keep the rate of slippages in Q4 lower than what it was in the third, he said.

The bank's CAR stood at 11.28 percent and slippages were at Rs 9,806 crore as of Q3FY16.Below is the verbatim transcript of BP Sharma’s interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18. Latha: As of now what is your capital adequacy with this Rs 1,150 crore coming in? A: Rs 1,150 crore coming in, of course the letter has come only yesterday, we will be above the stipulated levels so far common equity tier (CET) is concerned. Reema: Any levels you could help us with, say what the capital adequacy ratio from the current 11.28 percent, how much would it go up by? Your tier I we understand is at 7.88 percent, what will be the new levels after this Rs 1.150 crore of infusion? A: March 31 we will be closing our books, on April 1st to be precise. It won’t be proper to put a number but the minimum stipulated level of capital adequacy, we are definitely going to maintain. It will be little above than that. Latha: You are looking to raise more capital? A: We will be looking at other options after the balance sheet is finalised when a clear number emerges. Latha: Have you told us at what price the government is buying the shares, that Rs 1,150 crore? A: That pricing is being worked out as per the Securities and Exchange Board of India (SEBI) guidelines. Latha: You won’t be able to give an approximate capital adequacy? A: No, it will be above the stipulated level. It won’t be proper at this stage to put a number; there are balance sheet matters. However, on both tier I, tier II and CET, I don’t think there will be any crisis so far the minimum level is concerned. Reema: You said that you will balance your books and see whether you will need to raise any kind of more money say perhaps by a QIP but any rough indication of how much could be the amount that you would need to raise, a ballpark figure? A: Definitely we will be needing capital. The capital adequacy level as on December, I won’t call it highly satisfactory. We would like to raise capital but it all depends on the credit offtake. As on date you know the industry wise the uptake is low. Our capital requirement is linked with that. So, accordingly the scale of capital requirement will come down. Latha: What may be the NPLs you will have to recognise, you had to do a lot of recognition in the Q3, how much maybe the NPA recognition in Q4? We have only one day to end the month? A: Won’t be proper to put a number because it is basically after the closing it will be subject to audit. However, there will be slippage this quarter as well. Reema: How would it compare to the slippages that we saw in Q3, would it be same as that or perhaps more? A: We are trying to content below than that. That is what we have been trying. Reema: Would Q4 mark the end of the slippages or do you believe the second round of asset quality review is going to hurt the figures even in the first half of FY17? A: I won’t say that there won’t be slippage for anytime. The normal slippage, 1-2 percent is an incident that takes place with all banks. However, the rate of slippage is definitely going to come down in the next year because almost the worst part is going to be over this month. Latha: Will you be cutting rates after April 1, the marginal cost lending rate rules will come in? A: Reserve Bank of India (RBI) guidelines are there. We are working out and it may lead to some reduction. However, till the numbers are finalized, it won’t be proper to guess an answer. (Copy edited by Sidhartha Shukla. interview transcribed by Priyanka Deshpande)