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Our Bureau

Bangalore, April 21 The Reserve Bank of India has rejected private sector Karnataka Bank’s proposal to make a preferential share allotment to International Finance Corporation (IFC).

The proposal entailed private placement of 63.73 lakh equity shares at a premium of Rs 215 per share. The placement was to add Rs 143 crore to the bank’s capital. Karnataka Bank currently has a paid-up equity capital of Rs 121.35 crore.

But the RBI’s rejection is unlikely to have any big impact on the bank, which already has a capital to risk weighted asset ratio of 13 per cent.

This ratio reflects the capital the bank has against risk weighted assets.

The Karnataka Bank’s Chief Executive Officer and Chairman, Mr Ananthakrishna, told Business Line: “We will examine other options for capital raising, including tapping Qualified Institutional Buyers

Mr Ananthakrishna said that Karnataka Bank had sought to make the placement in view of its focus on tier-I capital. The tier-I capital is 10.5 per cent.

The placement would have helped increase the tier-I to 11.5 per cent, he added. He said, “We will look at the QIB option only after the audited results are finalised,”

During the last financial year, several banks, including public sector banks, had raised capital using the QIB route after the RBI clamped down on foreign currency bond placements through medium term notes or MTNs. QIBs include domestic financial institutional investors and foreign institutional investors.

The bank’s scrip closed the day at Rs 207, down from the last weekend’s price of Rs 211.75, following the announcement.

More Stories on : Private Banks | Preferential Allotments

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