QIP route was not used by banks prior to Bank of India, which plans to raise Tier-I capital by issuing 3,77,72,600 shares through QIP route. It has encouraged the ministry to advise the PSU banks to get the the draft amendment regulations approved from the respective bank boards to give way to private placement and preferential allotment.
Finance Ministry, after clearing the BoI proposal for QIP, said in a letter to all the nationalised banks A draft notification for amedment to your Banks Regulation on the same lines as has been approved in case of BoI is enclosed. It is requested that you may also like to consider to get the draft amendment regulations approved from the board of bank for publication in the Gazette.
The step is looked upon as empowering banks with solutions to raise capital to meet Basel II norms by means and routes not used earlier and faster to complete as compard to public offers as the deadline reaching very close.
QIP, private placement or preferential allotment are methods which are cheaper, faster and allows to get better valuation. This route is also effective when the market conditions are not very condusive, UCO bank chairman managing director S K Goel said.