Boi, Dena Alter Plans To Raise Tier Ii Capital

Sources said since both banks are comfortable with their current capital adequacy ratio they are not in a hurry to raise funds from the market, especially during the high interest rate regime

Bank of India (BoI) and Dena Bank have decided to reschedule plans for raising tier two capital from the private placement market due to the uncertainty in the interest rate scenario.

The banks, which were planning to raise tier two capital in January, will now raise funds after the announcement of the credit policy. Sources said that since both banks are comfortable with their current capital adequacy ratio they are not in a hurry to raise funds from the market, especially during the high interest rate regime. While Bank of India has a capital adequacy ratio of 10.26 per cent Dena Bank's capital adequacy ratio stands at 10.81 per cent

 

Sources said Syndicate Bank and the Bank of Maharashtra are also thinking of raising funds in the next fiscal to boost their tier two capital. While Syndicate Bank has a capital adequacy ratio of 8.80 per cent, Bank of Maharashtra has a 9.07 per cent capital adequacy ratio.

Both banks have received the union finance ministry and RBI approval and can access the private placement within a week if they so desires. "

However, the high interest rate regime, currently ruling the short-term debt has had an impact on the long-term debt market. Consequently the cost of borrowing for both banks will be higher than estimated," said merchant banking sources. BoI was contemplating raising Rs 250 crore while Dena Bank is planning to raise Rs 150 crore.

While the former was contemplating raising funds through the book-building route at nearly 12 per cent, the latter intended to raise capital via bonds with a fixed coupon of 12.75 per cent.