However, sources close to the development said that BoB might raise a lower amount from the market, even though it has the approval to mop up Rs 600 crore.
The bank will raise the funds through private placement of bonds and is being lead-managed by its own subsidiary BOB Capital Market Ltd, sources told FE.
The issue is to augment its tier-2 capital. Capital adequacy ratio (CAR) of the bank for the fiscal ended March 31, 2003 was 12.65 per cent. Tier-1 capital constituted 8.10 per cent with tier-2 being at 4.55 per cent.
The bank had during the last fiscal got the approval from the union ministry of finance to raise a maximum of Rs 600 crore through issue of subordinate bonds under tier-2 capital. It could also be noted that BoB had also announced its plan to raise issue during the fourth quarter in the last fiscal. The bank, however, had decided to defer the issue in view of the rising interest rate at that point of time. Rating agencies, Crisil and Fitch India have assigned the highest ratings to this issue.
The bank has raised an amount of Rs 1,700 crore through issue of subordinated bonds since 1995-96. The bank had raised Rs 500 crore in 1995-96, Rs 600 crore in 1998-99 and Rs 600 crore in 2000-01. The bank had gone public in 1996-97 and the size of the public issue was Rs 850 crore including premium amount of Rs 750 crore.