Dena Bank to raise Rs 200-300 cr through Tier II capital

Dena Bank, a public sector bank, plans to raise funds in the third quarter of the financial year either through upper Tier - II or Tier - II route.

P L Gairola, chairman and managing director of Dena Bank told Business Standard: "We plan to raise Rs 200 - 300 crore in the third quarter in this financial year."

He further said the fund will either be raised through upper Tier- II or Tier - II route. The bank is authorised to raise Rs 675 crore out of which it will plans to raise approximately Rs 300 crore in third quarter.

He further said that the bank would need the funds to maintain high capital adequacy ratio (CAR) as well as to sustain the bank's growth. It plans to raise funds in the third quarter as to yield better returns on the fund that it would raise. Till June, the bank had CAR of 11.19 percent.

According to the RBI norms, the bank have to maintain 9 per cent CAR. The bank had diluted nearly 51 per cent of the government's holding, Therefore, this leaves no room for a further dilution of equity to raise funds. The only way the bank can now raise fund is through Tier - I or Tier - II route or through overseas borrowings.

When asked of the recent reports in the media, where in the government might pump in funds for those banks which had almost diluted 51 percent of the government holding, Gairola was of the opinion that the government might have to come forward in future to help the banks with its expansion.

The banking sector as a whole which is on consolidation mode, looking at the opening up of the banking sector to foreign players by 2009, it has become quite relevant that the all banks must strengthen their position before the sector is opened up.

According to him, the banks with a diluted 51 per cent stake may not need funds from the government at present for expansion and for strengthening itself, but after 2009 those banks might need funds from the government. Talking of Dena Bank, he said, as of now, Dena Bank had not approached the central government for funds.

Dena Bank is also focusing on increasing the non-interest income through the sale of insurance and mutual fund products as well as other services.

"We are aggressively marketing the mutual fund product," added T R Chawla, general manager (Gujarat). The bank had set a target to achieving Rs 40 crore non-interest income and out of which in the second half of the financial year it expect to garner 60 per cent of the targeted non-interest income.