Bank of Baroda plans to raise Rs 9,000 crore through equity dilution

Bank of Baroda

In a bid to fund its growth during the fiscal, state-owned Bank of Baroda (BoB) has planned to raise Rs 9,000 crore through various instruments, including follow—on public offer (FPO).

The decision in this regard was taken recently by the board of directors.

“As per the final decision, the board has approved raising of additional capital funds up to Rs 9,000 crore (up to March 31, 2018) comprising of Rs 6,000 crore by way of equity capital through various modes at suitable stages and Rs3,000 crore by way of additional tier I capital instruments,” BoB said in a statement.

“Bonds will be issued in India or overseas in suitable branches,” it said.

Under the Basel—III norms, AT—1 bonds come with loss absorbency features, meaning that in case of stress, banks can write off such investments or convert them into common equity if approved by the RBI.

AT—1 bonds, which qualify as core or equity capital, are one of the means of raising capital by public sector banks that require Rs 2.40 lakh crore by March 2019 to meet global norms on capital adequacy (Basel III).

As per the scheme, public sector banks need to raise Rs 1.10 lakh crore from markets, including follow—on public offer, to meet Basel III requirements, which kick in from March 2019.

This will be over and above Rs 70,000 crore banks will get as capital support from the government. Of this, the government has already infused Rs 50,000 crore in the past two fiscals and the remaining will be pumped in by the end of 2018-19.

For the quarter ended March 2017, BoB reported a profit of Rs 154.72 crore as provisions for bad loans witnessed a significant decline.

The bank had reported a huge loss of Rs 3,230.14 crore in the same period a year ago.

The bank’s total income rose to Rs 12,852 crore in the March quarter, from Rs 12,789 crore in the year—ago period, BoB said in a regulatory filing to stock exchanges.

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