Bank of India to raise up to Rs 1,800 cr in capital via tier-II bonds

Crisil upgrades rating for Tier-I bonds to "AA" reflecting the lender's improved capital ratios and greater ability to make future coupon payments

Public sector lender Bank of India (BoI) plans raise upto Rs 1,800 crore in capital through tier-II bonds in order to meet regulatory norms, and for business growth.

Meanwhile, rating agency Crisil upgraded the lender's tier-I bonds from "AA-" to "AA", reflecting the lender's improved capital ratios and greater ability to make future coupon payments.

The BoI stock closed 0.4 per cent lower at Rs 54.5 per share on BSE.

The Mumbai-based bank’s capital adequacy ratio (CAR) was 15.10 per cent as on June 30, 2021, up from 14.9 per cent in March 2021 and 12.8 per cent in June 2020. BOI’s capital ratios have been supported by the regular capital infusion made by the Government of India (GoI) and higher accrual.

In August, BOI raised Rs 2,550 crore in equity capital through a qualified institutional placement (QIP), should also support the capital position, CRISIL said.

BoI received capital infusion of Rs 9,232 crore in Fiscal 18 and Rs 14,724 crore in fiscal 2019 and Rs 3,000 crore from the government of India in Fy 2021.

The overall ratings continue to reflect the expectation of strong support from the majority stakeholder, GoI, and the established market position and bank's comfortable resource profile. These strengths are partially offset by weak asset quality and modest earnings profile, CRISIL said.

The bank exited the prompt corrective action (PCA) framework of RBI in January 2019. Its gross advances grew by nine per cent in fiscal 2020, as against growth of two per cent in fiscal 2019 and de-growth of five per cent in fiscal 2018. However, growth in fiscal 2021 was hit by the pandemic and gross advances declined by one per cent (year-on-year basis) to Rs 410,436 crore as on March 31, 2021. During the first quarter of fiscal 2022, gross advances rose marginally to Rs 4,14,697 crore (+1% YTD).

Its asset quality has been weak as Gross non-performing assets (NPA) have remained elevated. Its gross NPA at 13.5 per cent as on June 30, 2021. Nevertheless, it has declined from 13.8% as on March 31, 2021, 14.8% as on March 31, 2020. The reduction in gross NPAs in fiscals 2020 and 2021 was largely contributed by write-offs.