The Indian Overseas Bank (IOB) may need additional capital of around Rs 9,500 crore till 2017-18, to maintain the capital adequacy ratio (CAR) as per the Basel III international accounting standards, which according to Reserve Bank of India (RBI) would come into effect from January 1, 2013.
Speaking to reporters while announcing the annual financial results of the bank, he said, “We may require an additional capital of nearly Rs 9,500 crore to meet the Basel III requirements. Starting January 1, 2013, we expect the real impact of the new standards by 2015.” The estimation is based on assumption that the credit rate would be about 20 per cent.
The bank would look at options to raise the capital. “Whichever options, including QIP (Qualified Institutional Placement), follow-on issue or qualified equity, will be looked at for raising funds to meet the requirements,” he said.
According to the RBI guidelines on Basel III, Indian banks have to maintain a minimum CAR of 9 per cent, in addition to a capital conservation buffer which will be in the form of common equity at 2.5 per cent of the risk-weighted assets. With this, the minimum CAR required for the banks would be 11.5 per cent, according to reports.
The common equity in tier-I capital has to be 5.5 per cent of risk weighted assets and the minimum tier-I CAR must be 7 per cent, instead of 6 per cent. The new rules will come into effect from January 2013 and banks will have to implement these by March 2018.
The bank is also looking at favourable market conditions in the present fiscal to raise $500 million through medium term note (MTN). This is part of the bank’s earlier announced plans to raise $1 billion through MTN for funding the long-term assets of its overseas branches.
In April, 2011, it raised the first tranche of $500 million (around Rs 2,250 crore at the time) as senior unsecured bonds through its Hong Kong branch. “We are looking at MTN for the rest of $500 million to be raised this fiscal when the market improves,” he said.
The international branches have posted a growth of 40 per cent during fiscal 2012-13. It has also applied to the RBI to upgrade its presence in China, Dubai, the UAE and Vietnam and to set up operations in Bangkok, he said.
Meanwhile, the bank is expecting a growth of 20 per cent in deposit and advance, for the fiscal 2012-13.
It is also poised to report a higher growth in disbursement of gold loan to commercial customers, from Rs 1,900 crore in 2011-12 to Rs 5,000 crore in 2012-13.
The IOB has posted an increase of 21.76 per cent in its net profit to Rs 528.81 crore for quarter-ended March 31, 2012, as against Rs 434.29 crore registered during the same period previous fiscal. Total income stood at Rs 5,416.09 crore for quarter-ended March, 2012, compared to Rs 3,916.58 crore posted for the corresponding period of last year, an increase of 38.29 per cent.
The total business for fiscal 2011-12 grew to Rs 3,21,707 crore from Rs 2,59,020 crore during the previous year, added the company. The net non-performing asset (NPA) stood at Rs 1,907.44 crore,as against Rs 1,328.42 crore as on March 31, 2011, with net NPA ratio of 1.35 per cent and 1.19 per cent, respectively. The CASA ratio was posted at 26.42 per cent compared to last fiscal’s 30.20 per cent.
