State-owned Central Bank of India is planning to restructure its home finance as well as financial and custodial services arms.
The bank might raise stake in Cent Bank Home Finance Ltd and convert Centbank Financial and Custodial Services into a merchant banking arm, said S Sridhar, chairman and managing director, at a Ficci banking conclave in Kolkata.
“In the housing finance arm, some existing stakeholders have expressed their desire to sell stakes. We will look at buying these. The restructuring should be over in the next six months,” he said.
Central Bank of India holds 59 per cent in Cent Bank Home Finance. Unit Trust of India, HUDCO and National Housing Bank are the other stakeholders.
“We will try to use the home finance subsidiary to complement the bank’s housing finance operations. The home finance company will give a lot of flexibility. We will also look at certain markets where we are not strong. Centbank Financial and Custodial Services will be restructured to offer merchant banking services, including loan syndication,” said Sridhar.
The home finance subsidiary has been dormant over the last few years. “There has been a resurgence in the home finance market but it has not been tapped. By restructuring this subsidiary, we will like to tap the opportunity,” he said.
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The bank plans to raise Rs 1,050 crore capital in 2009-10 to boost its capital adequacy ratio and fund growth.
The government infused Rs 700 crore in the bank in March 2009 as part of the total capital infusion programme of Rs 1,400 crore, said Sridhar.
The bank expects to receive the remaining amount of Rs 700 crore by the second half of this financial year.
“We can raise Rs 700 crore through Tier-I capital and the rest Rs 350 crore by way of Tier-II capital. For Tier-I, we will look at issuing preference shares or perpetual bonds,” he said.
The capital adequacy ratio of the bank was 13.35 per cent on June 30, 2009, according to Basel-II norms.
On interest rates, Sridhar said, “Given the current circumstances, there is limited scope for reduction in rates.”
The bank is also revamping some branches to promote them as model branches.