The Hindu Business Line : IOB to raise Rs 400-cr Tier II capital

New Delhi, July 16 Indian Overseas Bank (IOB) may tap the capital market with a follow-on-public offer (FPO) next fiscal to fund business growth. The bank will raise at least Rs 400 crore of Tier-II capital this fiscal as there was enough headroom on this front, its Chairman and Managing Director, Mr S.A. Bhat, said here.

“By going for Tier-II, I should be able to take care of my capital adequacy this year. But I hope the market would improve by then. That would enable me to go to the market with reasonable premium next year. I may go in for a FPO”, Mr Bhat told Business Line. He was in the Capital to inaugurate a new core banking solution (CBS) branch at Jasola.

Mr Bhat said the capital adequacy of the bank, under Basel-II, stood at 11.61 per cent. “If I continue with the growth plan that I have in mind, without raising much capital, at only around Rs 400 crore of Tier-II capital, I should end at 10.5 by end of the year. I am not satisfied with 10.5. I should be at least 11.5 or more. So I may opt for additional capital raising (likely FPO)”.

In the next fiscal, IOB wants to add 150 branches to its existing branch network so as to take the overall count to 2,000 branches. On the strategy for North India, Mr Bhat said that the bank would expand presence in places like Chandigarh, Delhi and Lucknow, where it already had reasonable presenceMeanwhile, Mr Bhat also made it clear that it would be difficult for the bank to get back to CASA levels of 40-45 per cent. “I expect CASA to stabilise at 30-35. It is currently at 32 per cent. The initiatives like the opening of this branch at Jasola would certainly help increase my CASA. But I don’t see it going up to 40 per cent levels”

Overseas presence

Mr Bhat said the bank’s board had very recently approved a proposal for opening a branch in Australia. “We will approach the Reserve Bank of India for their approval,” he said. IOB has also plans to open a branch in New Zealand. It is also looking to open a branch at Houston in Texas, besides a representative office in Dubai.

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IOB to raise Rs 400-cr Tier II capital