The Hindu Business Line : Two banks plan to raise capital

Vijaya Bank plans to raise Rs 500 crore of Upper Tier-II capital by October or November. "The capital would be used to meet the capital adequacy norms as per Basel-II," said Mr Prakash P. Mallya, Chairman and Managing Director, Vijaya Bank.

The bank's capital adequacy ratio as on June 30 was 11.55 per cent.

The bank has already raised Rs 250 crore as Upper Tier-II capital. The bank has also applied to the RBI for setting up representative offices in West Asia, China and Hong-Kong, said Mr Mallya.

He was speaking to reporters on the sidelines of a seminar in Mumbai.

Growth prospects

The bank expects a credit growth of 28 per cent and deposit growth of 18 per cent, he said. The bank expects the low-cost deposits to grow over 40 per cent from 35 per cent.

"After the reverse repo hike by the RBI, the cost of funds have risen by half to quarter per cent," he said.

"We may be forced to increase the interest rates after reviewing the market conditions," he said.

"Vijaya Bank hopes to improve its net interest margin to 3.50-3.75 per cent by March 2007, from 3.34 per cent," he said.

Canara Bank

Mr M.B.N. Rao

Canara Bank plans to come out with a follow-on public issue before the end of this calendar year, depending on market conditions, said Mr M.B.N. Rao, Chairman and Managing Director, Canara Bank.

"We have a huge headroom to raise equity fund as the Government holding in the bank is 73 per cent. But we will not dilute the entire stake at one stretch, because we want maximum advantage for our shareholders," he said.

The bank's CAR post-the public issue would be 12-12.5 per cent, he said.

Canara Bank plans to raise a total of Rs 3,000 crore this fiscal through equity, perpetual debt, Upper Tier II bonds in rupee and foreign currency.

Any decision about an interest rate hike would be taken at the bank's next board meeting, he said.

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