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Bank of India plans to raise capital during the second half of this year to meet credit requirements for the next fiscal.
The bank, which already has board approvals in place to raise tier-I capital of about Rs 7,800 crore, could raise a third of these funds this year, a top official indicated.
“During the third or fourth quarter this fiscal, we might use a combination of different instruments to raise funds for the next two years,” Mr N. Seshadri, Executive Director, Bank of India, told Business Line . The capital raised would depend on “what the Government decides on diluting or retaining its stake”, he said, adding that the bank plans to raise funds in two tranches.
The bank's capital adequacy ratio as on March 31, 2011, was 12.17 per cent
The bank, which reported a credit growth of about 18 per cent last year, is seeing “a bit of credit slowdown across all segments due to the interest rate scenario,” said Mr Seshadri.
According to him, short-term trade accounts have gone down marginally and the SME segment was also witnessing “some concern due to capital expenditure postponement”.
He expects a robust credit growth in the second half of the fiscal. “We hope to maintain 18-20 per cent year-on-year growth in advances this year, depending on the interest rate movement,” he pointed out.
Rate hike possibility
Mr Seshadri said that there could be at least one more rate hike this year, “after which rates will stabilise and start moving down towards Q3 and Q4.”
However, concerns could arise if interest rates continue to be high for a longer term.
On the savings bank side, he said that there was a marginal movement from savings to term deposits.
“It is not very substantial. CASA is still growing, and we had 18-19 per cent growth in CASA last year,” he pointed out.
However, with attractive interest rates, term deposits grew faster than savings in the first quarter of this fiscal. “CASA growth has picked up now, and we have acquired new customers also,” said Mr Seshadri.
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