Central Bank of India to raise Rs 80 bn to strengthen core capital

Public sector Central Bank of India will raise up to Rs 80 bn equity capital through various means, including a follow-on public offer, rights issue or a qualified institutional placement, to shore up its capital base.

The proposal was approved by shareholders at the bank's annual general meeting held on June 30.

Central Bank will allot shares to raise capital through FPO/Rights/QIP in India or abroad up to the value of Rs 80 bn in such a way that the government shall at all time hold not less than 51 per cent of the paid-up equity capital of the bank, the lender said in its annual report 2017-18.

The money is planned to be raised in one or more tranches.

The bank is required to maintain minimum common equity tier-I ratio of 5.50 per cent plus capital conservation buffer (CCB) of 2.50 per cent in the form of equity capital, tier-I plus CCB ratio of 9.50 per cent and overall CRAR (capital to risk weighted assets ratio) of 11.50 per cent by March 31, 2019.

"To comply with the Basel III requirement, there is a need to increase the capital to further strengthen the Capital Adequacy Ratio (CAR).

"Based on the business estimates your directors have decided to raise equity capital up to Rs 80 bn and the Bank may use equity capital raising options such as through public issue (ie follow-on-public issue)/rights issue /private placement, including QIP," the lender said in the report.

Central Bank said it will use the enhanced capital for the general business purposes of the bank.