DCB to get fresh capital of Rs 140 cr

Aga Khan Fund for Economic Development (AKFED), the principle shareholder in Development Credit Bank (DCB), has decided to inject fresh capital to the tune of Rs 140 crore ($32 million) into the bank subject to regulatory approvals. At present, AKFED holds 47 per cent stake in DCB.

Iain Cheyne, director of AKFED and the bank said, "At present, AKFED is in dialogue with the Reserve Bank of India (RBI) to discuss the process for timely infusion of the new capital into the bank and ensure full compliance with new foreign investment guidelines."

The infusion of fresh capital will help the bank grow its business and also create further provisions for the bank's legacy of non-performing assets (NPAs), said the bank in a statement. The bank's NPAs to net advances, as on March 31, 2004, stood at around 5 per cent. Its capital adequacy ratio stood at 14.14 per cent.

The decision to inject new capital followed a strategic review of bank operations and capital structure by the international consulting firm McKinsey and Company. It is also the result of changes in banking regulations concerning ownership of Indian banks recently published by the RBI.

The bank had sought RBI approval to permit Chryscapital, the private equity investor, to pick up 12 per cent stake at Rs 55 per share in the bank. The total transaction would work to around Rs 38 crore. The deal is awaiting the regulator's approval for over a year now.

The bank also said that its managing director and CEO, H V Sheshadri will be stepping down when his term expires on March 12.

Sources close with the development said that the central bank did not clear the reappointment of H V Sheshadri. The bank has decided to induct Vijay Kelkar, advisor to the minister of finance, Anuroop Tony Singh, chief executive officer and managing director of Max New York Life, and Narayan Seshadri, chartered accountant and independent consultant on its board.