Bank of Indias Rs 675 crore public issue will enable it to increase its lending powers by Rs 3,000 crore. The issue, which will open on February 21, will increase the banks capital adequacy ratio (CAR) from the current 9.28 to 11 per cent. The money raised by the public issue will be deployed in modernising the countrys infrastructure.
Currently, the banks Tier I and Tier II capital stand at Rs 1,659.83 crore while its total risk weighted assets stand at Rs 17,883.88 crore.
Of Rs 489-crore paid up capital, the bank has approached the government to convert Rs 200 crore into preference capital on which 16 per cent dividend will be paid over a period of five years, after which BoI will return the money to the Centre. BoI has already returned Rs 93.47 crore to the government. Even in this environment of poor investor confidence, chairman and managing director G Kathuria said: The issue will sail through on the strength of our reputation as trusted bankers. Moreover we are confident of attracting small investors as the issue has been priced at only Rs 45 which is almost the same price at which our shares were being quoted before our bank was nationalised.
The bank has not reserved any portion of the issue for foreign institutional investors.
It plans to expand its network of 19 foreign branches. It has identified four centres - Jakarta, Malaysia, Trinidad & Tobago and Ghana as possible venues for its branches. BOIs foreign operations contribute 23 per cent of its total business and 33 per cent of its net profits.
The bank has borrowed $36 million from the World Bank and has added Rs 100 crore for the modernisation of its branches which it plans to complete over the next two years.
BoI now has 413 computerised branches which is the highest among nationalised banks. Its net profit, which stood at Rs 276 crore for 1995-96, was also the highest among nationalised banks. The credit deposit ratio stands at 56 per cent and the bank is confident of increasing it to 58 per cent by the end of this financial year with credit offtake by corporate houses improving.
The net non performing assets currently stands at seven per cent. BoI has signed an MoU with the Reserve Bank of India to bring this down to five per cent by the end of the year.
he bank intends to achieve this through upgradation of advances, containing slippages and adopting a more aggressive recovery plan.
