City Union Bank board approves raising Rs 1,100 cr through equity, debt

Private sector City Union Bank on Monday said its board has approved the proposal to raise up to Rs 1,100 crore through equity and debt.

The lender will seek shareholders' approval for the fundraise plan at its upcoming AGM next month.

The board of directors in a meeting held on July 13, 2020 fixed August 14, 2020 as the date of ensuing annual general meeting (AGM) by way of video conferencing/other audio visual means, City Union Bank said in a regulatory filing.

The board of directors will seek approval of members in the AGM for "Raising further capital through QIP (Qualified Institutional Placement) route to the tune of Rs 600 crore (including premium). As done in previous years, this year also we are seeking the approval of shareholders by way of enabling resolutions," said the private sector lender.

It may be recalled that last year also the bank obtained the approval of shareholders for raising capital through QIP to the tune of Rs 500 crore but "we have not utilised the same", it added.

The bank will also seek the permission of members for "issue of unsecured perpetual debt instruments (part of additional tier I capital), non-convertible debentures, Basel III compliant tier I and II bonds or such other debt securities as may be permitted under RBI guidelines, up to a total amount of Rs 500 crore, on private placement basis," it said further.

Perpetual bonds carry no maturity date, so they may also be treated as equity, not as debt. To comply with Basel-III capital regulations, banks globally need to improve and strengthen their capital planning processes.

These norms are being implemented to mitigate concerns on potential stresses on asset quality and consequential impact on performance and profitability of banks.

Indian banking system has been implementing Basel III standards in phases since April 1, 2013. The banks were expected to fully implement these norms by March 2020.

Stock of City Union Bank closed at Rs 127.80 apiece on the BSE, down 3.33 per cent from previous close.