The Hindu Business Line : Vijaya Bank to raise capital through Tier-II bonds

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New Delhi March 2 In a change of tack, Vijaya Bank has now decided to raise capital only through a Tier-II bond offering. The bank had earlier indicated that it would raise capital of about Rs 500 crore through a mix of Tier-I and Tier-II capital. It had even looked at a perpetual debt instrument for raising Tier-I capital.

"We will hit the market before end March. It will be a mix of upper and lower Tier-II. We plan to raise at least Rs 300 crore. It would be a subordinated bond," Mr Prakash P. Mallya, Chairman and Managing Director, told Business Line here.

Overseas offering

Mr Mallya also hinted that the bank might look at an overseas offering for raising capital sometime next fiscal. Asked why he was looking to raise capital through bonds, when interest rates have hardened, Mr Mallya said, "If I don't raise capital, my capital adequacy would go down. I don't want to take a chance."

Vijaya Bank's capital adequacy is currently pegged at about 11.38 per cent and is expected to go to 12 per cent if Rs 500 crore of fresh capital is raised. Already during the current fiscal, Vijaya Bank has raised Rs 250 crore of Tier-II capital at 9.25 per cent.

It has targeted a total business of Rs 60,000 crore by end-March. "We are on course to achieve our total business target of Rs 60,000 crore by end-March," Mr Mallya said.

He also said that the bank would earn Rs 14-15 crore interest income from the Reserve Bank of India's recent decision to pay interest on cash reserve ratio balances.

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