Global Trust Bank (GTB) has received permission from the Reserve Bank of India (RBI) and the finance ministry to raise tier-II capital overseas, making it the first Indian bank to secure permission for raising such resources.
Speaking to Business Standard, Ramesh Gelli, chairman and managing director, GTB said, The approval to raise $10 million in the form of unsecured subordinate debt and to issue $10 million worth of foreign currency convertible bonds (FCCB) came through in April this year.
The proceeds of the issue will form part of the tier-II capital and will shore up the capital adequacy of the bank which was 10.16 per cent on March 31, 1997. If the average tenor of these bonds is more than five years, these funds will not attract the stipulations of CRR or SLR, he added.
The bank has also got permission from the RBI to issue Rs 70 crore worth of rupee-denominated debt which will also form part of tier-II capital.
Of this limit sanctioned by RBI, the bank has already issued 10 year bonds at 17.5 per cent and raised Rs 20 crore last year. GTB managed to achieve a capital adequacy ratio of 10.16 per cent as against the RBI stipulated norm of 8 per cent only after raising Rs 20 crore.
At the end of the last financial year, the banks paid-up capital stood at Rs 104 crore against the authorised Rs 200 crore and reserves and surplus of nearly Rs 80 crore.
While deposits grew by 955.04 crore in 1996-97, the increase in credit disbursal was a paltry Rs 85 crore. This fuelled suspicion that the bank was constrained from lending because of inadequacy of capital.
Gelli, however, denied that lending to corporates last year was hampered by problems on the capital adequacy front. In the first half this year, advances are seen increasing by not more than 10 per cent over the March 1997 level of Rs 146 crore.
However, the bank will have to shore up its capital adequacy if there is significant credit offtake in the second half.
This is the first time an Indian bank has been allowed to raise tier-II capital abroad
