Allahabad Bank may look at the scope of raising Rs 450 crore of subordinated debt from the market. It may further look at raising Rs 500 crore of tier II capital and Rs 150 crore of tier I capital by the year end.
The subordinated debt would help the bank in increasing its capital adequacy ratio (CAR) by more than 60 basis points from 12.54% at present.
The bank?s Crisil rating for the long-term instrument category has improved from AA stable to AA+ stable on Thursday. The long-term instruments include lower tier II bonds aggregating Rs 2,261.90 crore, Rs 150 crore of tier I perpetual bonds and Rs 500 crore of upper tier II bonds.
?The AA+ rating would bring down our funding cost by another 10 paise,? bank?s chairman and managing director KR Kamath told FE.
The bank has been looking at opportunity to raise funds from the market. With the improved rating the bank feels the time has come to raise some capital. ?We can look at raising Rs 500 crore in the upper tier II. Probably before the next year we might raise Rs 150 crore in the tier I capital,? he said.
Earlier in March this year, Allahabad Bank raised Rs.1,050 crore comprising innovative perpetual bond of Rs.150 crore, Rs 500 crore from upper tier II and Rs 400 crore through subordinated debt.
The Bank?s CAR has come down to 12.54% now against 13.11% last year. ?We were holding our investment in mutual funds that has gone up by 4,700 crore. We took a very conscious decision of not liquidating that during the earlier quarter,? Kamath said.
The bank is holding mutual fund to the tune of Rs 7,500 crore in its book. ?Had we liquidated it our CAR would have been 13.46% now,? he said.