PSBs to raise over Rs 500 bn equity capital in FY19 for business growth

Public sector banks are planning to tap the markets to raise more than Rs 500 billion this fiscal to shore up their capital base for business growth and meeting regulatory global risk norms.

Capital is very much required for these banks as they are saddled with non-performing assets (NPAs) of about Rs 10 trillion.

According to analysts, their first quarter results may not be very encouraging despite heavy cleaning of books as the dust has not settled on the NPA front.

Out of 21 public sector banks, 13 have already taken the approval of their boards or shareholders for raising capital through the equity market, as per the data compiled by PTI.

The combined value of the shares sales of these banks is upwards of Rs 500 billion.

Leading the pack is the Central Bank of India, which has already got shareholders' approval for raising Rs 80 billion equity capital through various means, including a follow-on public offer, rights issue or a qualified institutional placement (QIP), to shore up its capital base.

As per the latest annual report of the Central Bank, the bank will allot shares to raise capital through FPO/rights issue/QIP in India or abroad up to the value of Rs 80 billion in such a way that the government shall at all time hold not less than 51 per cent of the paid-up equity capital. 

Canara Bank also proposes to raise up to Rs 70 billion through various means, including rights issue and QIP. Out of this, the bank plans to raise about Rs 10 billion through an employee stock purchase scheme (ESPS), under which it will issue up to 6 crore equity shares to its staff.

Bank of Baroda aims to mop up Rs 60 billion, while Syndicate Bank plans to access the capital market and raise equity capital of up to Rs 50 billion in one or more tranches. 

Other banks which have capital raising plans include Oriental Bank of Commerce, UCO Bank, Corporation Bank, Dena Bank, Allahabad Bank and Bank of Maharashtra.

As per the Rs 2.11 trillion capital infusion programme announced by the government in October last year, banks will get Rs 1.35 trillion through re-capitalisation bonds, and the balance Rs 580 billion through raising of capital from the market.

Out of the Rs 1.35 trillion, the government has already infused about Rs 710 billion through recap bonds in the banks and balance would be done during this fiscal.