Bank of Maharashtra plans to raise Rs 650 cr

Bank of Maharashtra is likely to raise Rs 650 crore through bonds or hybrid instruments in the remaining part of this fiscal to meet a strong demand for credit and provide capital for operational risks.

"We may raise upto Rs 650 crore more in the current financial year to maintain a capital adequacy ratio of above 11.5%," BOM Chairman M D Mallya said.

The funds will be used for meeting strong credit growth and make provisions for operational risks under stringent Basel II norms which Indian banks will adopt from March 2007.

The Pune-based bank had a CAR of 11.4% as on June, but the ratio has increased after the bank borrowed Rs 225 crore through bonds in the first week of July.

The bank will raise Rs 650 crore through Upper Tier II bonds or Tier I hybrid instruments and the timing of the issue will depend on market conditions.

The total business (deposits and advances) of the bank was Rs 45,104 crore, with deposits at Rs 27,611 crore while advances at Rs 17,493 crore till June, 2006.

"We expect 25% growth in business at Rs 55,000 crore in 2006-07. Loans are expected to grow by 29% and deposits by 22%," Mallya said.

Mallya said the bank is focussed on mid-sized corporates, retail and SME segment for growth.

With cost of funds increasing, the bank plans to revise upward the lending rates this week.