Intl Travel House Has Strategic Recast In Mind

The Reserve Bank of India is planning to permit banks to issue preference shares for augmenting their tier two capital. "We are examining the issue in the light of representations received from banks," an RBI official said.

According to the Banking Regulation Act, banks incorporated after 1937 cannot issue preference shares. Hence, allowing banks to issue preference capital may need a legal amendment. This assumes significance in the light of banks being asked to shore up their capital adequacy ratio to 9 per cent by March 2000, and 10 per cent thereafter.

According to a senior official of a nationalised bank, "Capital adequacy ratio gets eroded every year by 1-1.5 per cent depending on risk weighted assets that are added during the year as a bank expands its business."