CLB freeze on CSB fund raising lifted

Thrissur-based Catholic Syrian Bank (CSB) has received the go ahead from the Company Law Board (CLB), Chennai, for its capital raising plans.

It will now privately place equity to raise Rs 35 crore by the end of next month and another Rs 35 crore through a rights issue by November.

CLB had earlier restrained the bank from implementing the resolution on capital raising passed at the bank's annual general meeting on June 30, on the basis of a petition filed by some shareholders.

The shareholders had authorised the bank's board of directors to raise Rs 100 crore additional capital to raise its net worth to Rs 300 crore as per the directions of the Reserve Bank of India (RBI).

The capital raising would also help the bank comply with the revised capital adequacy norms of Basel II from March 31, 2007.

The RBI requires all private sector banks to have a minimum net worth of Rs 300 crore to begin with and ultimately have a minimum equity capital of Rs 300 crore.

The restrictions put by the CLB delayed the bank's capital raising plans by a month.

The board was authorised to pursue and implement various capital raising proposals through private placement, preferential allotment, rights issue, public issue or a combination of any of these modes.

N R Achan, chairman, CSB, told Business Standard that the bank would not opt for an initial public offering (IPO) to raise equity capital.

He said, "CSB had not taken a final decision on how to raise the remaining Rs 30 crore. One of the options could be to go for another round of rights issue. A decision in this regard would be taken immediately after the first two phases of capital expansion."

The bank, which has a capital adequacy of 11.26 per cent, plans to develop and diversify its business and hence decided to increase the capital base. In the first quarter of 2006-07, CSB earned net profit of Rs 5 crore.

Its net profit in 2005-06 was Rs 6.14 crore. A provisioning of Rs 40 crore for salary arrears was the primary reason for lower net profit in 2005-06.