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G. Naga Sridhar

Hyderabad, Sept. 11

Andhra Bank does not have to worry about dilution of the Government stake below 51 per cent to meet its capital requirements, as it has comfortable headroom for Rs 2,630 crore in tier I and II capital.

According to the ‘Report on Currency & Finance’ of Reserve Bank of India,

Andhra Bank is one of the three banks where the Government stake is precariously close to 51 per cent. This means that raising further capital (to meet Basel II requirements) without dilution of Government stake could be difficult for them.

“This is, however, not an issue for us as we are very comfortable and there is no immediate requirement of capital,” Mr R.S. Reddy, Chairman and Managing Director, Andhra Bank, told Business Line.

The capital to risk-weighted assets ratio (CRAR) of the bank stood at 12.13 per cent at the end of first quarter.

“By the end of September, this would improve to 12.20-12.25 per cent,” he said.

The bank had mobilised Rs 600 crore as subordinate debt last week. “We are also planning to raise some more capital through perpetual bonds soon.

This will be used for further expansion of credit and this has got nothing to do with Basel II compulsions,” he said.

When asked about the limitations caused by 51.6 per cent Government stake in the Hyderabad-based bank, the Chairman said though there is no actual capital requirement for the bank, it could still mobilise funds without diluting the Government stake.

“The options of tier I, II, hybrid products and rights issue are always there. The SBI rights issue is an example of this possibility,” Mr Reddy said.

According to RBI estimates, the banking sector would need Rs 5.68 lakh crore capital in the next five years if they are to maintain CRAR at 12 per cent.

More Stories on : Public Sector Banks | Disinvestment

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