Public sector banks are planning to tap the markets to raise over Rs 50,000 Crore this fiscal to shore up their capital base for business growth and meet regulatory global risk norms. Capital is of prime requirement for these banks as they are saddled with non-performing (NPAs) of about Rs 10 Lakh Crore. Analysts said their first quarter results may not be very encouraging despite heavy cleaning of books as the dust has not settled on the NPA front. Data suggests that 13 out of 21 public sector banks have already taken the approval of their boards or shareholders to raise capital through the equity market.
Combined value of the shares sales of the banks is over Rs 50,000 Crore. The Central Bank of India is leading the group, and already has shareholders' approval to raise Rs 8000 Crore equity capital through various means, including a follow-on public offer, rights issue or a qualified institutional placement (QIP), to shore up its capital base. The Central Bank's latest annual report suggests the bank will allot shares to raise capital through FPO/rights issue/QIP in India or abroad up to the value of Rs 8000 Crore in such a way that the government shall at all time hold not less than 51 per cent of the paid-up equity capital.
Canara Bank also proposes to raise up to Rs 7000 Crore through various means, including rights issue and QIP. The bank plans to raise about Rs 1000 Crore out of this, through an employee stock purchase scheme (ESPS), under which it will issue up to 6 Crore equity shares to its staff. Bank of Baroda aims to clean up Rs 6000 Crore, while Syndicate Bank plans to access the capital market and raise equity capital of up to Rs 5000 Crore in one or more tranches. Other banks with capital raising plans include Oriental Bank of Commerce, UCO Bank, Corporation Bank, Dena Bank, Allahabad Bank and Bank of Maharashtra.