State Bank of Mysore to raise Tier-II capital

State Bank of Mysore (SBM) has plans to augment its Tier-II capital further by about Rs 150 crore in the current fiscal to improve its capital adequacy ratio (CAR) so as to meet Basel II norms. At present, the bank has a CAR of 12.08 per cent.

In January this year, the bank enhanced its Tier-II capital by issue of fixed interest rate unsecured non-convertible redeemable bonds of Rs 175 crore. "The bank has not yet decided when to raise the capital further but it could be anytime this fiscal," SBM managing director Y Vijayanand said.

With the growing asset base of SBM and ICRA upgrading the rating of the bank's existing bonds from AA to AAA, Vijayanand feels that there is "a lot of room for raising Tier II capital". Last fiscal, the net worth of the bank increased to Rs 750.79 crore from Rs 576.90 crore, representing a growth of 30.14 per cent.

Vijayanand, who inaugurated SBM's ATM at Yashoda Hospital in Secunderabad here, told Business Standard that the bank would consider raising Tier-I funds only at a later stage.

Stating that the bank had made all-round progress in 2004-05, he said that SBM has plans of increasing its operating profit and net profit substantially during the current year too. Keeping this in mind, the bank has set an aggregate business growth target of Rs 5,200 crore for the current fiscal. Last year, the bank's net profit at Rs 206.26 crore registered a growth of 16.94 per cent and operating profit at Rs 451.66 crore recorded a growth rate of 6.29 per cent.

He said that the bank's advances to the corporate sector in 2004-05 increased by 38 per cent as the demand for credit went up on account of the creation of new capacities and modernisation of the existing units in the industrial sector. He was expecting the same trend to continue even during the current fiscal.

Despite a delay in the onset of monsoons this year, Vijayanand said that SBM was expecting to maintain the last year's nearly 42 per cent growth rate in agricultural advances.

"We are going to participate in a big way in investment credit to the agriculture sector and in financing self-help groups," he said adding that the total advances to the farm sector was estimated to go up to Rs 1,650 crore from the existing Rs 1,228 crore.

SBM's plans for the current year, according to Vijayanand, include setting up 15 more branches, networking of all its 600 branches spread across the country, extending the single window concept to all branches and establishment of retail asset central processing centres in different cities.

He said that several recovery drives initiated by the bank last year had brought down SBM's non performing assets. While the gross NPA level declined by 7.76 per cent from Rs 514.53 crore to Rs 415.37 crore, the net NPA level declined from Rs 186.38 crore to Rs 80.99 crore.