South Indian Bank plans to bump up capital base

South Indian Bank (SIB), an old private sector bank, is planning to raise its capital base from Rs 450 crore to Rs 1,000 crore over three years. The bank has already received the Reserve Bank of India's (RBI) approval to hike its authorised capital to Rs 200 crore from Rs 100 crore.

The bank is also looking at possible acquisitions in the north and also has plans to set up a bank in Dubai. "The bank plans to raise capital by the end of the current fiscal through a rights issue or a public offering," said V A Joseph, chairman and chief operating officer, South Indian Bank.

Fresh infusion of capital will result in a dilution in the present shareholding pattern, thereby bringing down ICICI Bank's stake. "ICICI Bank may not be able to subscribe to future issues as the regulator has stated that no single entity can hold more than 5 per cent stake in a bank," said Joseph.

ICICI Bank currently holds 11.25 per cent stake in South Indian Bank Ltd. The old private sector bank's scrip today ended lower at Rs 57.65 on the Bombay Stock Exchange (BSE), reflecting a fall of 0.43 per cent over Friday's close of Rs 57.90.

SIB's current capital adequacy ratio stands at 10 per cent as on March 31, 2005. The bank, however, proposes to raise around Rs 65 crore through Tier-II bonds later this year, said Joseph.

The bank plans to expand its branch network to the northern states through acquisitions. "We are open to acquiring a small bank with 60-100 branches in the north," said Joseph.

In addition to building up of local branch network, SIB also plans to open a representative office in Dubai. "Thirty-four per cent of the bank's total business comes from services rendered to non-resident Indians. Hence we plan to open a representative office in Dubai," said Joseph.