Bank of Baroda to raise Rs 5,500 crore capital through bonds, ESOP

CEO Jayakumar said the bonds were likely to be floated by August-end or the first week of September to raise tier II/tier I capital

Public sector lender Bank of Baroda (BoB) plans to raise Rs 5,500 crore through the issuance of bonds and employee stock option plan (ESOP) in the coming weeks.

"While Rs 4,000 crore would be raised through bonds, the remaining chunk of Rs 1,500 crore would be mopped up through ESOP," BoB managing director and CEO P S Jayakumar told Business Standard on the sidelines of a press conference here on Friday.

He said the bonds were likely to be floated by August end or the first week of September to raise tier II/tier I capital. "We are expecting to complete the entire capital raising exercise by the end of September."

According to reports, BoB had already informed in its regulatory filing that its capital raising committee is likely to meet next week to consider raising capital through issuance of bonds, compliant to Basel III norms.

Meanwhile, Jayakumar, replying to a media question, said there was adequate liquidity in market, while loans were now being linked to repo rate even as interest rates were also coming down.

Although commercial banks were conducting their due diligence to ensure norms related to credit were complied with, the banks were proactively responding to the credit demand from industry, he added.

"The non performing assets (NPA) cycle is also reversing after hitting its peak," he said commenting on the quality of loans portfolio currently held by the domestic banking sector.

Jayakumar was here as part of the ongoing banking consultative process in Uttar Pradesh under the aegis of the State Level Banking Committee (SLBC) in its efforts to review internal performance, reinforce alignment with national agenda and contributing to the strengthening of macro economy.

Similar exercises are underway in other states and this would culminate in the national capital with the respective heads of public sector banks giving a presentation to the central government along with their analysis and recommendations.

Meanwhile, he said UP had the potential to see its credit deposit (CD) ratio rise above 75% and touch the national average with greater emphasis towards the MSME, agriculture, retail, housing and education sectors, apart from the state government's flagship one district, one product (ODOP) scheme, which is aimed at boosting the traditional industries of the state.

Recently, UP chief minister Yogi Adityanath had asked commercial banks to improve the CD ratio in the state to match the national average. Compared to the national CD ratio of 78%, the corresponding figure for the state currently stands at about 57%, thus indicating lower credit formation in UP and the flight of capital/savings to other states.

However, the CD ratio of UP improved from 51% in June 2018 to 57% in June 2019, thus gaining about 6% over one year period. The CM had asked banks to increase the number of branches.