Keeping in view the Axis bank?s business projections in both domestic and overseas operations, bank?s directors have recommend approval of a maximum amount of borrowing of R1 lakh crore. The proposed limit is intended to take care of the maximum borrowing on the books of the bank and would adequately cover present borrowing arrangements, future opportunities in the form of hybrid capital and overseas as well as domestic funding needs arising from business growth. The revised limit would also enable the treasury to access cheaper funds that may be available in the market on particular days.
The present borrowing limit of R20,000 crore was approved by the shareholders on June 2, 2006 and is required to be reviewed in view of the substantial growth of the bank?s business, both from the point of view of types of businesses handled and aggregate volumes.
Also, since the last revision of the borrowing limit, total assets have increased more than four times from R49,731 crore as on March 31, 2006 to R2,42,713 crore as on March 31, 2011. The growth of credit has generally accelerated at a faster pace than that of deposits, resulting in a higher proportion of funding requirements being met through borrowings. An adequate borrowing limit, commensurate with the size of the balance sheet, is also considered to be an important enabler for the treasury, lending it the flexibility to fund the bank?s requirements through a combination of customer deposit and market borrowing at optimal cost and tenor.
The bank?s vision of growth over the next few years will be fulfilled from the domestic infrastructure as well as the overseas offices at present. Funding asset growth overseas would also involve substantial fund raising activities.
Further, besides funding, the other major challenge for the bank in managing its balance sheet is adequacy of capital.
Apart from the headroom for tier?II subordinated debt instruments regularly created through the plough-back of profits, opportunities for raising hybrid capital in the form of perpetual debt and upper Tier-II bonds are also available to the bank.
The options for the bank to meet its high funding and capital requirements have thus increased significantly through a combination of plain vanilla Tier-II bonds and hybrid capital that may be raised in the domestic markets and overseas.
AXIS Bank Ltd has informed BSE that the Board of Directors of the Bank at its meeting held on June 17, 2011, has approved borrowing / raising funds by issue of Debt instruments on private placements basis within the limits permitted by RBI and other regulatory authorities from eligible investors, in one or more tranches. Accordingly, as per the business plan for the year, Bank proposes to raise the funds in domestic and/or overseas market, eligible for inclusion in Tier I and Tier II capital.