The Hindu Business Line : Andhra Bank plans to raise Rs 600-cr tier II capital

“The current rates are lower and the recent measures by Reserve Bank of India will make them lower. Though there is no pressure on us, we are considering the tier- II option,” Mr R.S. Reddy, Chairman and Managing Director, Andhra Bank, told Business Line here.

The funds, once raised, would be utilised for credit expansion, he added.

The bank raised Rs 200 crore tier - I capital last week and has headroom to raise Rs 1,000 crore tier – II capital.

The cost of funds in the industry is moderating. “However, we are not expecting it to decrease dramatically, which may happen only in next financial year,” Mr Reddy said.

Cost of funds

The cost of funds for the bank in the second quarter was at 6.2 per cent and 6.01 per cent for the half year. Between October and till date, the funds for the banks are cheaper than the deposits, he observed.

The Hyderabad-based bank is also currently working on remodelling its retail business model placing it firmly on technology-based platforms.

“By March, 2009, all of our branches will be integrated with core banking solution. The new business model will also focus on areas such as non-interest (fee-based) income,” he said.

Targets for branches

The bank, which has a total business of Rs 93,000 crore at present, is in the process of setting up separate targets for the branches in augmenting the fee-based income.

“This includes non-fund-based limits for guarantees,” he said adding that the non-interest income (net of treasury operations) has not been growing at a comfortable level for the bank and in the industry in general.

The bank’s total business, however, is growing “robustly” and there are no signs of slowdown, Mr Reddy said adding: “The credit growth is robust. The advances are growing at 28-30 per cent and deposits at over 20 per cent.”

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