BoM plans to raise Rs 300 cr by Sept

Government-owned Bank of Maharashtra plans to raise Rs 300 crore capital through a combination of Tier I and Tier II bonds by September this year.

The bank hoped to get Rs 500 crore as recapitalisation from the government by December 2009, said M G Sanghvi, Executive Director, Bank of Maharashtra, on the sidelines of a seminar in Kolkata on Friday. The bank has sought capital infusion of Rs 1,500 crore over a period of three years.

“The recapitalisation will boost our capital adequacy to 13 per cent and Tier I capital to 8 per cent by March 2010. The government is considering our recapitalisation proposal ,and we are hopeful of receiving the first tranche of Rs 500 crore by December-January,” he said. The present CAR of the bank stands at 12 per cent.

 

Also, though the government holding in the bank at present stands at nearly 76 per cent, it would not go for a follow-on public offer due to the current market conditions and interest rate situation, he added.

The bank sees credit and deposit growth of 20 per cent and 17 per cent respectively in the present financial year.

“The credit growth was almost stagnant during the first half of this year. However, we are witnessing a pick up in demand both in agriculture and retail sector,” said Sanghvi.

The net interest margin (NIM) of the bank has also been under pressure, he added.

Initially the bank had set a NIM target of 2.75 per cent for the current fiscal. However, it now expscts NIM to be around 2.6 per cent. Also, the bank has shed high cost deposits worth Rs 1,800 crore since March 2009. This apart, the bank sees interest rates to move by 25 basis points in the fourth quarter of the financial year, if liquidity reduces.

“If credit picks up in the fourth quarter, and liquidity reduces, there might be an increase in interest rate. There was little scope for interest rates to move up given the present liquidity in the system and might only move up a little post the third quarter,” Sanghvi observed.