Boi Plans Rs 1000cr Mopup To Shore Up Tier Ii Capital

Bank of India (BoI) plans to raise Rs 800 crore to Rs 1,000 crore this year, largely via the debt route which would comprise Tier II capital.

This will enhance the capital adequacy ratio (CAR) of the bank which was 11.3 per cent in 1996-97, compared with 8.4 per cent in 1995-96. Also, the bank has not ruled out the possibility of a global depository receipts (GDR) issue this year.

Currently, the bank has, via the first public issue, diluted the stake of the Government of India to 76.53 per cent. As per guidelines of the ministry of finance (MoF), the bank can dilute up to 51 per cent.

 

According to R Nagarajan, general manager, credit, BoI, by opting for Tier II capital, will have an enhanced capital adequacy position and will hence be in a position to increase its competitiveness, particularly in the area of term lending, by enabling the bank to offer finer rates. BoIs non-food credit in domestic operations recording 16.7 per cent growth, higher than that of the banking sector at 10.1 per cent. This was largely on account of term lending to large corporates in volumes of Rs 100 to Rs 300 crore as well as good offtake in FCNR(B) loan scheme at $ 257 million up to date.

The exact amount the bank will raise however, has not been finalised, and will depend on the desired CAR. The bank will consider various long term options including bonds, floating rate notes, among others. The funds will be raised from the domestic and overseas markets. Talking of the banks future plans, M G Bhide, chairman and managing director, BoI, said, that apart from term lending, the banks other thrust areas will be credit cards. Profits from credit cards were Rs 7 crore for 1996-97, after making Rs 4 crore provision for losses. Projected turnover in credit cares is targeted at Rs 1,000 crore with expected profits of Rs 10 crore.

Other areas of importance for BoI will be priority sector lending and foreign operations. Lending to priority sector increased to 44.1 per cent in 1996-97 as compared to 40 per cent last year. Foreign operations contributed 21 per cent to profits with all 18 overseas branches making profits for the second year in a row.

As per the restructuring process which was initiated last year following a blueprint structured by consultants Coopers and Lybrand, the treasury operations will be merged this year. The bank may even lend overseas in case domestic credit offtake is tardy.

Treasury profits for this financial year are estimated at Rs 400 crore in 1996-97 and the bank has set a target of Rs 500 crore for the current financial year.