 "BoB to hire realty advisor to monetise properties")
As a step to garner capital for business growth, government-owned Bank of Baroda (BoB) plans to hire an advisory firm to value its properties and prepare a plan to monetise some of these.
BoB owns 268 properties, with a total value of at least Rs 4,800 crore. Various owned buildings are also in construction stage, a senior BoB official said.
The Reserve Bank of India (RBI) recently changed the rules for revaluing of assets. Revaluation of a bank’s property is to be part of common equity tier-1 (CET1) capital, at a discount of 55 per cent. Earlier, this was treated as part of tier-2 capital. Based on the existing position, the management has told the government it does not require additional subscription to equity capital. The central government holds 59.2 per cent stake. The capital adequacy ratio was 12.18 per cent, with tier-I at 9.57 per cent at end-December 2015.
The priority would be to generate capital through efficient use of assets and operations, over issuing fresh equity, managing director P Jayakumar had said.
State Bank of India is also using the RBI change to do a realty revaluation. They say it would allow adding Rs 9,000 crore to the capital adequacy calculation. According to rating agency ICRA, such announcements by a few large government banks could lead to recognition of banks’ CET1 by Rs 20,000-25,000 crore. In most public sector banks (PSBs), valuation was done some years earlier and they’d look to be revaluing on the basis of current market values.
MANDATE FOR REALTY ADVISOR
BoB owns 268 properties, with a total value of at least Rs 4,800 crore. Various owned buildings are also in construction stage, a senior BoB official said.
The Reserve Bank of India (RBI) recently changed the rules for revaluing of assets. Revaluation of a bank’s property is to be part of common equity tier-1 (CET1) capital, at a discount of 55 per cent. Earlier, this was treated as part of tier-2 capital. Based on the existing position, the management has told the government it does not require additional subscription to equity capital. The central government holds 59.2 per cent stake. The capital adequacy ratio was 12.18 per cent, with tier-I at 9.57 per cent at end-December 2015.
The priority would be to generate capital through efficient use of assets and operations, over issuing fresh equity, managing director P Jayakumar had said.
State Bank of India is also using the RBI change to do a realty revaluation. They say it would allow adding Rs 9,000 crore to the capital adequacy calculation. According to rating agency ICRA, such announcements by a few large government banks could lead to recognition of banks’ CET1 by Rs 20,000-25,000 crore. In most public sector banks (PSBs), valuation was done some years earlier and they’d look to be revaluing on the basis of current market values.
MANDATE FOR REALTY ADVISOR
- Use of space in the existing built-up properties
- Disposal of unviable properties
- Acquisition of new property on a need basis
- Redevelopment of old properties
- Renewal of existing leased property