Highly placed sources said that the bank is considering issuing 4.4 crore shares, having a face value of Rs 10 each, aggregating a possible minimum size of Rs 44 crore, latest by end of the fiscal.
The government holding in the bank stands at 62.5%. The bank would like to bring it down to 51% in a single tranche, said a senior bank official.
The paid-up capital of the bank is Rs 400 crore.
The bank had come out with an initial public offering of Rs 150 crore in February 2001, which reduced the governments stake to 62.5%.
The official, however, declined to give details of the premium the bank was expecting to book. We have yet to appoint a lead banker. It is too premature to comment on the premium, said the official.
Raising capital through Tier II bonds is costly due to high interest rates. The present economic environment is conducive, and if we strike now, we would be able to get a very good premium on the issue, explained the official.
To a query on the issue, the banks chairman and managing director TS Narayansami said: We have a very comfortable capital situation right now, even after Basel II considerations. Our CAR stands at 14%. Yet, we might not rule out a public issue sometime in future to fund expansion plans.
Mr Narayansami also said that while the bank was internally examining a proposal on public issue, nothing has been concretised so far.
The banks executive director R Balakrishnan said: We have not discussed the issue with the government or the banks board.