Canara Bank Plans Rs 500 Cr Bonds

Canara Bank has decided to raise around Rs 500 crore through bonds to meet capital adequacy requirements and lend resources to infrastructure projects.

Canara Bank chairman and managing director T R Sridharan told Business Standard that the bank will need to raise Rs 700 crore by March 2000 to increase its capital adequacy ratio to 9 per cent. "Looking at the current market conditions, we will opt to raise tier-II capital, instead of using the equity route," he said.

Sridharan said around Rs 250 crore will come from internal resources, while the remaining would be raised through the issue of bonds, which the bank may privately place with financial institutions.

The bonds are expected to have a tenure of around 10 years and carry a coupon of around 14 per cent.

Sridharan said the bank's board had approved around Rs 2,000 crore for infrastructure projects, including those in the power and telecom sector. "We are now looking at exposure in roads, bridges and port projects," he said. The bank is also planning to team up with State Bank of India, as part of a consortium, to fund some mega projects.

Canara Bank's operating profit during the first-half of 1998-99 increased by 60 per cent to Rs 326 crore compared with Rs 198 crore during the same period last year. Net profit for the first-half of 1998-99 increased to Rs 105 crore against Rs 59 crore during the first-half of 1997-98. Net profit for 1997-98 stood at Rs 203.02 crore.

Canara Bank's equity capital stood at Rs 578 crore on March 31, 1998, while reserves were at Rs 1,725 crore. The ratio of owned funds to deposits stood at 6.1 per cent, with owned funds standing at Rs 2,303 crore on March 31, 1998. During 1997-98, deposits, including overseas deposits, increased by 21 per cent, or Rs 6,600 crore, to Rs 38,045 crore. Non-resident deposits increased to Rs 6,302 crore. Advances increased by 17 per cent to Rs 16,825 crore during 1997-98.

The bank had a capital adequacy ratio of 9.54 per cent on March 31, 1998, above the stipulated norm of 8 per cent. Non-performing assets as a percentage of total assets stood at 7.52 per cent.