UTI Bank may advance capital raising plan as Basel-II nears

UTI Bank would have to advance its capital raising plans on account of the implementation of Basel-II norms, a senior bank official said.

The norms, which will come into force from 2007-08, are expected to lead to a one percentage point decline in the bank's capital adequacy ratio, which stood at 12.66 per cent as on March 31, 2005.

"We are adequately capitalised today. However, the bank would have to advance its capital raising plans on account of the Basel-II implementation," said a senior bank official.

"It could be a domestic issue. The bank would have to evaluate the options with its investment bankers," the official added.

In March, the bank raised around $256 million through a global depository issue. The issue received strong investor response from Asia, Europe and the US.

It had earlier stated that this fresh dose of capital should support the bank's capital requirements for three years.

The bank has been gearing up to adhere to the Basel-II norms. It has, in association with Boston Consultancy Group, set up a internal rating model to facilitate smooth transition to the internal rating-based approach.

The implementation of the standardised approach is likely to have a 100 basis point impact on the bank's capital adequacy ratio, said the official.

However, as and when the RBI permits banks to migrate to the internal rating based approach, the bank will led to some capital release, he added.

"Every corporate asset that the bank books today is rated by the bank's internal rating model," said the official.

The RBI suggests that to migrate to the IRB model, banks should have relevant data for five years. By 2007, UTI Bank will have a customer database for five years in place, he added.

"To support the bank's immediate growth plans we could raise funds through tier II bonds. We have the leeway to raise around Rs 1,050 crore through tier-II bonds," the official added.

On the bank's business plans, the official said credit cards would be launched in October and wealth management products by July. The bank is also bullish on its overseas expansion plans.

"We plan to set operations in Singapore, UAE, Srilanka, Shangai and Hongkong subject to regulatory approvals," the official added.