BoI plans to raise up to Rs 8,000 cr in tier-I and tier-II capital

Lender to also set off accumulated losses worth Rs 23,782 cr

Public sector lender Bank of India plans to raise capital up to Rs 8,000 crore by issuing equity shares, tier-I and tier II bonds to support credit expansion and meet regulatory norms.

The lender also proposes to set off accumulated losses worth Rs 23,782.38 crore against amount from the share premium account of Rs 35,331.77 crore.

It is seeking shareholders' nod for both the proposals and has called an Extraordinary General Meeting (EGM) on September 19. BoI shares closed 1.6 per cent higher at 48.45 per share on BSE.

Referring to capital raising plans BoI said in a filing with the exchanges that the norms for Basel III capital requirements will be fully phased in as on September 30, 2020. Basel III norms for capital kicked in from April 1, 2013.

The bank’s overall Capital Adequacy Ratio (CAR), stood at 12.76 per cent, with Common Equity Tier-1 (CET1) of 9.48 per cent as on June 30, 2020.

The Board decided that the bank should maintain minimum CAR in line with the RBI Basel III transitional arrangements. However, the Bank may require to raise additional Capital during FY 2020-21 or later based on the assumption of growth in Risk Weighted Assets (RWA) and plough back of profits.

The bank would raise capital using various routes, including Qualified Institutions Placement (QIP), public issue, rights issue, follow-on public offer (FPO) and private placement.

On move to set-off accumulated losses, the lender said it will present a true and fair view of its financial position. It will not affect any ratios such as book value per share, return on equity (ROE), and earnings per Share (EPS).

The set off will help it improve its distributable reserves. It would also benefit shareholders as their holding will yield better value. It is expected to enable the bank to explore opportunities to the benefit of its shareholders, including dividend payment.

The proposal will also put BoI in a better position to achieve its turnaround plans in a time-bound manner.

The bank was seeking the shareholders approval for use of share premium account for setting off accumulated losses as it would be deemed to be a capital reduction. The bank’s equity capital structure and shareholding pattern post reduction of Premium Account will remain unchanged.