The Hindu Business Line : Oriental Bank plans to raise Rs 500 cr via Tier-II bonds

AIMED at augmenting the capital-to-risk assets ratio (CRAR) in view of growing business volumes and also to meet the Basel-II norms, Oriental Bank of Commerce (OBC) plans to raise Rs 500 crore as Tier-II capital.

Following the acquisition of the ailing Global Trust Bank in 2004-05, OBC suffered a steep fall in CRAR at a little over nine per cent from more than 14 per cent.

The bank came out with a second public issue last year and raised the CRAR to 13.54 per cent. At present, theCRAR is hovering at around 13 per cent.

"Being a public sector bank, we cannot go for further equity offering. The Government holding in the bank has already come down to 51 per cent, leaving no headroom at all for equity issue. Accordingly, we have decided to raise Rs 500-crore through an issue of subordinated bonds. We are also examining proposals on issue of perpetual bonds and preference shares," the OBC Chairman and Managing Director, Mr K.N. Prithviraj, told Business Line.

Organic growth: Having consolidated its presence in the South and North through the acquisition of GTB, the bank now plans to refocus on organic growth.

It has submitted a proposal to the Reserve Bank of India for opening 70 branches and 65 off-site automated teller machines during the next fiscal.

The bank has also rehashed its business targets. As against the earlier target of achieving Rs 1-lakh-crore of business by the current fiscal-end, the bank now targets to reach the coveted mark during first quarter of next fiscal.

Though the bank witnessed a slowdown in growth of business volumes, its performance has matched the parameters stipulated by the Finance Ministry on profitability, productivity, return on networth and recovery of NPAs.

Buoyed by the emerging business opportunities, the bank has now set its sight on achieving Rs 2-lakh-crore business by 2010, Mr Prithviraj said. Stating that the integration of GTB with OBC had been quite smooth and successful, Mr Prithviraj said though OBC was permitted to carryover the losses of GTB for a period of 12 years, it had decided to absorb the losses over a period of five years only.

Accordingly, the bank has absorbed Rs 246 crore of losses during 2004-05 and would absorb further Rs 246 crore this fiscal. "We expect the entire losses to be cleared in the next three years," Mr Prithviraj said.

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