Central Bank of India (CBI) has approached the RBI seeking sanction to restructure its present capital base and allow it to get listed in the market within the next few months.
Plans to get listed in the next few months.
KOLKATA: Central Bank of India (CBI) has approached the Reserve Bank of India (RBI) seeking sanction to restructure its present capital base and allow it to get listed in the market within the next few months. The bank needs sufficient capital to shore up its capital adequacy ratio (CRR) for the future along with keeping pace with its targeted credit growth in the current fiscal.
The bank is also in the process of tying up with UTI for distribution of mutual funds shortly. The bank proposes to hit the market in the current year, but much would depend on the RBI’s permission for a different treatment for CBI’s capital. “We’ve asked as to whether the present capital of Rs 1,124 crore can be separated into preference and equity capital. The risk weights in credit growth has gone up and there is an urgent need for capital,” H A Daruwalla, chairperson and managing director, CBI, said on the sidelines of a banking conclave organised by Ficci.
The bank’s CRR, which stood at 12.15% as on March 31, 2006, fell to 11.10% over the last couple of months. “We have targeted a 20% growth in credit and propose to take our total business to 1.27 lakh crore in 2006-07.” She, however, did not divulge the size of the issue that the bank was looking at and the proposed break-up of the current capital. The bank’s advances and deposits grew by 34% and 14% respectively in 2005-06. CBI raised Rs 600 crore as Tier II capital at the end of March and may chose to raise some more if it fails to receive the permission to restructure its capital base and hit the market. According to the chairperson, the bank was increasing focusing on off-balance sheet growth areas.
While it is in the process of lining up distribution of mutual funds, it also is in the process of bringing in cash management products. It already has a tie-up with LIC and New India Assurance for selling life and non-life products, respectively. The bank’s deposits grew by 9.4% in 2005-06, as against the industry growth of 14%.
Earlier during the day, Daruwalla laid threadbare problems faced by public sector banking. The worst part was corporates going out literally on a “window shopping” exercise for getting loans at ‘sub-PLR rates’, but in contrast asking for best rates in case of deposits, she said.
“The problem with public sector banks is that they cannot form a cartel like any industry. Bankers are sometimes compelled to do things which may turn out to be commercially unviable as well,” she said.
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