The Hindu Business Line : Allahabad Bank not planning to expand equity base now

Kolkata June 20 Mr A.C. Mahajan, Chairman and Managing Director of Allahabad Bank, has made it clear that there are no plans to expand the equity base of the bank till 2009.

"We cannot go for the public issue because of some legal constraints," Mr Mahajan observed, while addressing the company's shareholders here on Wednesday. "The Government holding is 55 per cent." But there being headroom for raising more than Rs 1,600 crore, the bank foresaw no problems in meeting the capital requirement by opting for Tier II and other routes. "We'll do it when we'll need it," he said.

The bank's capital adequacy, he said, was quite robust even though the capital adequacy ratio had dropped to 12.52 from the earlier 13.37. "We're much above the stipulated minimum of nine per cent and therefore a slight drop in the ratio would not make much of a difference," he said.

Reiterating Allahabad Bank's plan to achieve a business of Rs 2,00,000 crore by 2010, Mr Mahajan observed, "We're targeting business growth at a compound rate 20-25 per cent."

The lower dividend — 30 per cent for 2006-07 compared with 40 per cent in 2005-06 — was due to the bank's decision to conserve resources for meeting the Basel II norms.

"We've to build up our reserves to handle various risks such as the operation risk, credit risk and market risk," he said.

CASA campaign

The bank, the shareholders were told, was planning to launch campaign for CASA (current and savings accounts) mobilisation for four months in two phases of two months each so that CASA go up by 2-3 per cent this fiscal and the first phase campaign would start from July.

As on March 31, 2007, CASA deposits went up by 18.7 per cent to Rs 22,611 crore and the share in total deposits stood at 37.9 per cent.

From July 1, the bank would also start e-payment and net banking on a limited scale in various CBS (centralised banking solutions) branches in the coming months. CBS had been rolled out in 18 branches and the number of such branches would rise to 400 by March 2008 and 900 by March 2009.

Referring to the general insurance joint venture, which Allahabad Bank has floated in partnerships with Indian Overseas Bank, Karnataka Bank, Dabur Ltd and Sompo of Japan, the Chairman and Managing Director expressed hope that the joint venture would underwrite its first policy towards the end of this year, most probably around November/December.