The Hindu Business Line : Allahabad Bank may raise Rs 1,000 cr this fiscal

Kolkata, June 15 Allahabad Bank is likely to raise Rs 1,000 crore in 2009-2010 to boost its capital adequacy ratio and fund its business growth, according to its Chairman and Managing Director, Mr K. R. Kamath.

The bank has headroom for Rs 2,450 crore comprising Rs 600 crore worth Tier-I capital over two years, Mr Kamath told newspersons after the bank’s annual general meeting here on Monday.

The capital adequacy ratio of the bank currently stands at 13.11 per cent. “There is a need to infuse capital for future growth. We might also look at a rights issue if the situation is favourable,” he said. On a year-on-year basis, the bank’s advances grew by 25 per cent and deposits by 19 per cent so far in the first quarter (April-June) of 2009-2010, he said, hoping that the business growth this year would be 18 per cent.

The bank’s shareholders approved a 25 per cent dividend earlier recommended by the board of directors.

Allahabad Bank, as the CMD indicated, proposes to delist its shares from the Calcutta Stock Exchange in view of cost and compliance-related issues.

The bulk of the trading in the bank’s equity shares happens on the National Stock Exchange and the Bombay Stock Exchange , and there was no turnover on CSE during 2007-08 and 2008-09, according to the banks’ annual report.

“The CSE did not provide any significant tangible benefit to the shareholders of the bank, and delisting would help in cost reduction, which is now incurred in the form of payment of annual fees to the CSE and for the compliance of various statutory requirements,” the report added.

On lowering of interest rates, Mr Kamath said, “We are operating in a softer interest rate regime. There are signals from the RBI and the government to cut rates and we will respond. We will take a call on it at our ALCO meeting.” However, it was essential to bring down interest rates on deposits in order to cut the lending rates, he observed.

The net interest margin (NIM) of the bank was under pressure due to an overall demand to bring down lending rates, he pointed out. The bank expected NIM at about 2.75 per cent for 2009-10, he said.

The bank brought down its sub-PLR lending to 64 per cent in 2008-09 (71.8 per cent in 2007-08). The PLR advances of the bank increased to 19 per cent in 2008-09 (12.48 per cent). Asked about doing away with the sub-PLR lending, Mr Kamath said, “The RBI has set up a working committee on the sub-PLR issue… we have to wait and watch before taking a call on it.”.