Public-sector lender Bank of Baroda on Friday said it has received board approval to raise up to ₹13,500 crore in additional capital for the financial year 2021.
In a notification to the stock exchanges, the bank said it had “considered and approved raising of additional capital fund up to Rs. 13,500 crore up to 31 March, 2021 and beyond if found expedient, comprising ₹9,000 crore by way of common equity capital by various modes including QIP, etc. in suitable stages and ₹4,500 crore by way of additional tier 1/ tier-II capital instruments with an inter-changeability option, issued in India/overseas in suitable tranches.”
QIP stands for qualified institutional placement. The fundraising will be subject to statutory and regulatory approvals, the bank said.
Bank of Baroda’s capital adequacy ratio stood at 13.48% and common equity tier 1 (CET 1) ratio was 9.85% as on 31 December.
Banks are bracing themselves by raising capital to tide over the disruption caused by the spread of COVID-19. Earlier this week, Kotak Mahindra Bank Ltd announced plans to raise around ₹7,500 crore. Yes Bank Ltd is also in the process of scouting for managers for its ₹5,000-crore issue.
Mint, on 2 April, had reported that the lockdown to counter the COVID-19 crisis, sluggish economic growth and the consequent rise in bad provisions will exert pressure on the capital adequacy of banks, citing notes issued by rating agencies.
According to Moody’s Investors Service, the surge in loan loss provision along with a decline in revenue will hurt the profitability of banks, leading to a deterioration of capitalisation. “However, the government so far has not announced any new plan to provide capital support for PSBs. Most rated private sector banks will maintain strong capital buffers,” it said.
The government had infused ₹70,000 crore into state-owned banks in fiscal 2020. In FY19, it had infused over ₹1 trillion in PSBs with the last round of ₹48,239 crore in February 2019, allowing six banks to exit the Reserve Bank of India’s (RBI) prompt corrective action (PCA) framework.
Shares of Bank of Baroda on the BSE closed at ₹46.4 today, down 4.23% from its previous close.
