UTI Bank to raise Rs 900 cr hybrid capital

UTI Bank will raise foreign currency-denominated hybrid capital of over Rs 900 crore in the second quarter (July-September 2006) to support its international growth plans. It will also raise about Rs 866 crore through the domestic hybrid capital bonds (tier I and II).

The instruments issued in foreign currency carry fine rates linked to London inter-bank offered rate (Libor). The capital will be raised through medium term notes.

The bank expects to save over 200 basis points in interest costs compared with the coupon rates (interest rates) prevailing in the domestic market, UTI Bank official said.

On July 21, 2006, the Reserve Bank of India (RBI) allowed banks to raise capital funds through issue of foreign currency debt instruments without its (RBI's) prior permission.

The RBI, in its January 2006 guidelines for hybrid capital raising, had said it would consider proposal for foreign currency capital bonds on a case-to-case basis.

The board approved plans to raise funds on Saturday (July 29), UTI bank official said.

The private sector bank plans to raise Rs 205.6 crore through tier I perpetual bonds issued in the foreign currency. It would also issue upper tier II bonds for Rs 700 crore having 15-year tenure in foreign currency.

The capital would be used to expand the volume of international business. At present, the bank has branch in Singapore with an asset base of Rs 700 crore and representative office in Shanghai.

The bank plans to establish presence in Dubai and Hong Kong through branches, its executive director S Chatterji said.

It will raise upto Rs 214.3 crore through tier I perpetual capital and Rs 652.4 crore via upper tier-II bonds from the domestic market in the current financial year.