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CARE Ratings has placed rating for Dhanlaxmi Bank's tier II bonds under "credit watch" after private sector lender reported loss of Rs 252 crore for financial year 2013-14.
Its capital adequacy (under Basel III) stood at 8.67%, below minimum regulatory requirement of 9% at end of March 2014. These factors would trigger the lock-in clause pertaining to the Upper Tier II Bonds, CARE said.
Kerala-based bank subsequently raised equity capital of Rs 29.64 crore in April, 2014. It would improve capitalization, rating agency said.
Its managing director and chief executive officer P G Jayakumar said bank is working on plans to raise equity capital of Rs 200 crore by issuing shares to 25 investors including Reliance Life Insurance Ltd. It is seeking shareholders nod for infusing additional capital at extra-ordinary general meeting today.
Bank has requested the approval of the Reserve Bank of India (RBI) to service the coupon on the Upper Tier II bonds. Jayakumar said bank was awaiting approval from the RBI. These upper Tier II bonds carry rating of "BB+".
The rating of Upper Tier II Bonds takes into account its sensitiveness to bank's capital adequacy ratio and profitability during the tenure of the instrument. The rating factors in additional risk arising due to existence of lock-in clause in this instrument.
CARE said the ratings continue to factor in moderate funding and liquidity profile with high reliance on bulk deposits and low share of Current Account Savings Account (CASA). Jayakumar said bank has improved share of low cost deposits (CASA) to 22% from 16% in the last two years.
