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| Banks to hit bond street for capital ahead of festive season |
| BS Reporters / Mumbai Aug 24, 2009, 00:40 IST |
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 Softer interest rates and expectation on credit buying in the busy season are likely to ensure hectic activity in the bond market in the coming week.
A host of state-run banks have lined up issues of about Rs 3,000 crore over the next week to 10 days to shore up their capital base. Likely to raise funds are Bank of India, Allahabad Bank, Oriental Bank of Commerce and State Bank of Hyderabad.
“We are planning to raise about Rs 500 crore by way of upper tier-II bonds in the next seven days. With credit likely to pick up in the busy season ahead, it is time to shore up the capital base. In addition, interest rates are also benign now,” said V K R Agarwal, chief financial officer, Bank of India.
Similarly Kolkata-based Allahabad Bank, which had recently raised Rs 450 crore, will once again look at raising about Rs 750 crore shortly.
“We have already raised Rs 450 crore of lower Tier-II bonds recently. We are ready to raise Rs 500 crore of upper Tier-II bonds and Rs 150 crore of hybrid debt only if we get the right price. We have secured all the necessary approvals for the capital raising but are not very hopeful, since bond yields have been going up,” an Allahabad Bank official said.
Punjab National Bank, however, says the bank’s capital adequacy ratio is above 14 per cent and it is in no hurry to raise capital, as the bank feels rates are still high. “We will look at raising Rs 500 crore if the rates become attractive,” said Mohan Tanksale, executive director.
Dealers said State Bank of India may also look to raise at least Rs 1,000 crore through Upper Tier-II bonds. The country’s largest bank had already raised Rs 1,000 crore through a perpetual bond issue last week at 9.1 per cent.Dealers said Punjab and Sind Bank and Oriental Bank of Commerce may also tap the market by issuing tier-II bonds.
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