Allahabad Bank to raise Rs 1,000 cr via bonds

Allahabad Bank, one of the oldest banks in the country, is planning to raise Rs 1,000 crore through bonds by the end of this month.

Out of this, the bank intends to raise Rs 900 crore through tier-II bonds, and Rs 100 crore through tier-I bonds.

“We were waiting for the Reserve Bank of India to cut rates, and now with that happening we have decided to go for capital raising. Also, the market is conducive for raising funds,” said K R Kamath, chairman and managing director, Allahabad Bank.

The Kolkata-based bank is planning to raise Rs 500 crore by way of upper tier-II bonds, Rs 400 crore through subordinated bonds in the lower tier-II category, and Rs 100 crore though innovative perpetual debt instruments (IPDI), which falls in the tier-I capital. The bank’s capital adequacy ratio (CAR) stood at 12.20 per cent as on December 2008.

This apart, the bank will take a call on reducing the interest rate on lending and deposits when the bank’s asset liability committee (Alco) meets next week. The banks’ prime lending rate at present is 12.50 per cent.

“Interest rates should come down as there is a case for reduction. The final decision will be taken after the Alco meets next week. There might be reduction in deposits rate first, or there might be a reduction in both deposits and lending rate together,” Kamath said.

The bank today informed the Bombay Stock Exchange that Crisil and Care have rated its proposed upper tier-II bonds of Rs 500 crore as AA/ stable and AA respectively, and subordinated lower tier-II bonds of Rs 400 crore as AA/ stable and AA+ respectively.