New Delhi, Jul 26: Public sector lender Canara Bank plans to raise Rs 7,000 crore in equity capital through rights issue or qualified institutional placement (QIP) in the current financial year, according to the bank’s chief.
“This year, the board has given an approval to raise Rs 7,000 crore and will take it up in the annual general meeting tomorrow (Thursday) for shareholder approval. We will raise it via rights issue or QIP mode, whichever is suitable,” Rakesh Sharma, chief executive officer and managing director of Canara Bank, said in a post results call with investors.
This capital raising will also include ESOPs (employee stock option plans) if the government approves, he added.
Confident of the capital raising, he said, “If we can improve our fundamentals then capital raising should not be a problem. As of now, Q1 and Q2 are likely to be good.”
The government-owned bank reported a 12 percent rise in net profit at Rs 281 crore in Q1 FY19 (from Rs 252 crore in the year-ago quarter) backed by healthy jump in net interest income of 43 percent and reduction in non-performing assets (NPAs).
The fund-raising may further boost the capital strength of the lender. Even as the bank is adequately capitalised from the regulatory point of view but may require growth capital from the government, adds Sharma, who took charge of Canara Bank in September 2015 from a small private lender Lakshmi Vilas Bank.
Canara Bank’s capital adequacy ratio as on June-end improved to 13 percent (regulatory requirement of 10.875 percent) as against 12.61 percent a year ago.
Canara Bank has also stepped up efforts to tackle large bad loans.
Speaking about monitoring large corporate loan accounts, Sharma said, “We have large credit monitoring modules for all accounts above Rs 1 crore. If we find any irregularities or defaults, these will be regulated by the regional, head and circle offices.”
He further said that for recovery, “Starting July 1, we have introduced a stressed asset management wing for all assets over Rs 25 crore to give specialised attention by the general managers.” This will ensure the stressed assets will be keenly monitored and accordingly tackled by experts in the bank.
This, along with project “Sashakt” will also help in speedy recovery of bad loans.
Sharma exudes confidence to target reduction in NPAs to the tune of Rs 16,000-17,000 crore for the fiscal year ending March 2019 with Rs 10,000 crore coming from the insolvency accounts.