Public sector lender Bank of Baroda on Friday said it had received approval from shareholders to raise up to Rs 6,000 crore through equity capital by way of either qualified institutional placement (QIP), a follow-on public offer (FPO), preferential issue, rights issue, ADR-GDR, private placement, compulsorily convertible debentures or a combination of these.“The shareholders approved the capital raising at the 22nd Annual General Meeting of the bank that was held today (Friday) at Sayajirao Nagargriha, Akota, Vadodara,” the bank said in a statement. The bank’s capital adequacy ratio under Basel-III norms stood at 12.13% at the end of March quarter of FY18.
According to the statement, the meeting was chaired by Ravi Venkatesan, chairman of the bank, PS Jayakumar, MD & CEO, Mayank K Mehta and Papia Sengupta, executive directors of the bank and other directors. Public sector banks have been trying to raise money from markets following a nudge from the government and in order to reduce their dependence on capital infusions from the latter.
Last year, the government had announced a plan to shore up capital position of PSBs through a recapitalisation programme of Rs 2.11 lakh crore. This does not seem viable anymore as the PSBs deal with increasing slippages, losses on bond portfolios, the early recall of additional Tier 1 (AT-1) bonds and the Nirav Modi fraud. This has led to a sharp drop in PSBs’ share prices and reduced their ability to raise money from the markets.
In a note in May, ratings agency Icra had said that the efficacy of the recapitalisation programme has been significantly reduced as 27% of the fresh infusion was envisaged as fund-raising from the markets. Karthik Srinivasan, senior vice president & group head, financial sector ratings, Icra, said in the note: “Through the recapitalisation plan, Rs 90,000 crore of capital infusion has been done in FY18. However, the fact that this is less than sufficient got reflected after announcement of regulatory forbearances during the first week of April 2018, which was intended to shore up their financial year-end reported capital ratios.”