Cosmos Bank planning to raise capital via alternative means

Pune, Jan 23 | Updated: Jan 24 2007, 06:11am hrs
The Cosmos Cooperative Bank Ltd is planning to raise its capital through alternative means to augment its share capital through issue special instruments, Dr Mukund Laxman Abhyankar, chairman of Cosmos said. The bank is awaiting detailed guidelines from the RBI to raise such stable and long term funds, Abhyankar said.

Even without the special instruments, we raised Rs 27 crore from the existing shareholders last year and our share capital went up to Rs 69 crore and is today at Rs 73 crore, Abhyankar said.

But as and when it is allowed we would like to raise funds through the ways suggested by the Vishwanathan committee report, he said. How much the Cosmos bank would raise and through which instruments has not been decided yet.

As per the NS Vishwanathan Committee recommendations, the Urban Cooperative Banks (UCBs) are to be provided with instruments and avenues for raising stable and long term funds having equity or quasi equity characteristics. UCBs could be allowed to issue unsecured, subordinated, non-convertible, redeemable debentures/bonds and funds raised through such instruments which may be treated as Tier-II capital. These bonds could be transferable by endorsement and delivery.

The UCBs could also issue special shares, redeemable cumulative preference shares on specific terms and conditions. These special shares will be non-voting, perpetual and transferable and treated as Tier-I capital. The other option is to raise deposits of over 10-year maturity and such deposit be treated as Tier-II capital.

The Rs 6,260 crore Cosmos, which is entering its 102nd year, has capital which is higher than many other urban co-operative banks and many small commercial banks, Abhyankar pointed out. Last year, Cosmos grew inorganically with the merger of four ailing co-operataive banks. From now on the board has decided that it will merge only with profitable banks, Abhyankar said. Two proposals for merger of Ankaleshwar Taluka Mahila co-operative bank and the Naroda industrial co-operative bank with Cosmos is awaiting the nod.

The bank has a network of 83 branches. With RBI granting branch licences selectively we can grow organically, the Cosmos chairman added. Cosmos is looking at adding branches in Kutch, Bhuj, Saurashtra, Gandhidham, Veraval and Morbi.

Further boost for the bank has come with RBI granting Cosmos an Authorized Dealer Licence Category-I to carry out foreign exchange business. We were losing a lot of business because of this gap in our offering and with the introduction of the forex business we expect to do business of about Rs 300 crore and potential income of about Rs 20 to Rs 25 crore next year, Abhyankar said.