State Bank of Travancore in need of Rs 3,000 cr capital by March 2019

State Bank of Travancore (SBT), associate banking unit of State Bank of India, will need equity capital of Rs.2, 500-3, 000 crore to support annual 14 per cent in assets till March 2019. 

Rating agency ICRA in a statement said that SBT, a public sector lender will need this amount to maitain core equity capital ratio (CAR) of nine per cent under BASEL III norms. It is part of tier I capital. 

The bank’s total capital adequacy ratio under Basel III norms was 10.1 per cent as in December 2014. Its core equity capital of 7.9 per cent compares well with most public sector banks. 

SBI, which holds 79 per cent stakein SBT, has been infusing capital at regular intervals. During FY14, SBI infused equity capital of Rs. 385 crore into SBT. 

SBI is also expected to be the key participant in the proposed Rights Issue of Rs 485 crore in current financial year. ICRA expects support from SBI to continue going forward as well. 

Besides eqyity capital (tier I), bank is also raising debt capital (tier II) bonds. 

SBT will issue basel III compliant bonds upto Rs 691 crore toraise tier Ii capital. Rating agency ICRA has assinged "AAA" rating for bond offering. 

SBT’s gross advances grew by a modest three per cent in FY14 (ended March 2014) to Rs.70,782 crore as against banking sector average of around 14 per cent during the same period. 

Further, its gross advances declined by about three per cent to Rs 68, 521 crore in nine months ended December 2014. This fall in gross advances could be attributed to the conservative business approach adopted by the management due to the asset quality pressures. The slipages have been high especially in the corporate segment. 

As for asset quality profile, SBT’s gross non performing assets increased to 4.9 lercent in December 2014, yp from 4.3 per cent in March 2014 and 2.6 per cent in March 2013.