Money & Banking

Vijaya Bank adequately capitalised for next two years

Anjana Chandramouly Bangalore | Updated on March 29, 2011

Mr Albert Tauro, CMD, Vijaya Bank

Public sector Vijaya Bank, which recently got additional capital of Rs 368 crore from the Government of India, is adequately capitalised for the next two years, according to a top official of the bank.

“Typically, banks grow at about 18-20 per cent. For that kind of growth, we don't have to borrow any further capital,” Mr Albert Tauro, Chairman and Managing Director, Vijaya Bank, told Business Line. “With this infusion and our plough-back, we should be able to match for the next two years. If there is a shortfall in the overall capital, we will go for tier-II. We have a huge headroom of Rs 3,800 crore,” he said.

The bank has also not raised any tier-II capital in the past three years, pointed out Mr Tauro. “In case there is a need, we will go for a tier-II instrument of a reasonable size — Rs 200-300 crore,” he said.

Govt holding

With the recent infusion, the Government holding in the bank will move up from 53.87 per cent to 57.7 per cent. Though the Government's plan was to move its holding from 58 per cent to 60 per cent, “we are not aware of the composition of the beneficiaries of the Rs 6,000-crore additional capital infusion planned for the next fiscal,” he added. According to him, if the Government plans to take it to 58 per cent, the bank might need about Rs 32 crore, and if it's 60 per cent, then the bank might need about Rs 250 crore.

However, going forward, tier-I capital could be an issue. “That is one thing we should be constantly watching,” said Mr Tauro. As of March this year, the bank's current tier-I capital could be 9.5 per cent. He added that as per Basel III guidelines, if the innovative perpetual debt (IPD) and perpetual non-cumulative preference shares (PNCPS) move out of tier-I capital, “there could be some pressure”. Of the 9.5 per cent tier-I capital, the bank's PNCPS was Rs 1,200 crore. Since Basel III will come into effect in 2017 or 2018, he expected that the bank would not face much of an issue.

Published on March 29, 2011

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