(Representative image) MUMBAI: ICICI Bank ’s board on Wednesday approved a proposal to raise Rs 15,000 crore through issue of fresh equity. This has taken the tally of completed and proposed equity issuances by banks this year to nearly Rs 80,000 crore.
Banks are taking advantage of the buoyancy in the capital market, making it the largest fund-raise from the markets in any year. The bulk of the capital is being raised by private banks who have already crystallised their plans, while public sector lenders like State Bank of India ( SBI ) and Punjab National Bank ( PNB ) have also said that they will tap the market.
One positive aspect of the supportive capital market is that banks are likely to raise most of the additional funds requirement on account of the Covid-19 forecast by rating agencies. Earlier this month, Fitch Ratings forecast that Indian banks will require $15 billion (Rs 1.13 lakh crore) in a moderate stress scenario. In June, ICRA had said that public sector banks will need between Rs 45,000 crore and Rs 82,500 crore in additional capital as slippages increase by 5%. The rating agency placed the capital requirement by private banks between Rs 25,000 crore and Rs 48,300 crore. Private lenders Kotak Mahindra Bank and IDFC First Bank were the first off the block to raise funds. Kotak Bank mobilised Rs 7,442 crore in May, which helped it meet the RBI directive on dilution of promoter stake. IDFC First Bank raised Rs 2,000 crore last month. Axis Bank and Yes Bank have board approvals in place to raise Rs 15,000 crore and Yes Bank has also firmed up plans for a public offer, in which SBI said on Wednesday it will invest up to Rs 1,760 crore.
In the public sector, SBI has an enabling provision from its board to raise Rs 20,000 crore and PNB’s board will meet on Thursday to approve a capital-raise. Besides pure equity, banks are also looking at raising funds by issuing quasi-equity bonds, which qualify for the purpose of capital adequacy. HDFC Bank has obtained approval to raise Rs 50,000 crore by way of additional tier-1 bonds. Bank of Baroda and Indian Bank are also looking at raising Rs 2,000 crore and Rs 5,000 crore by way of quasi-equity.
Besides issuing equity, banks have been improving their capital position by selling stakes […]
Banks to raise nearly Rs 80,000 crore in equity capital
