Indian Bank plans to tap the equity market next fiscal to bolster its Tier-I capital following a 25 per cent growth in advances this year, and the expectation of a robust growth next year too.
M B N Rao, chairman and managing director of Indian Bank, said that the bank would work out details of an equity issue next financial year. He added that the bank could also consider an overseas issue in the manner of Indian Overseas Bank's planned global depository receipts issue.
Indian Bank's equity expansion is driven primarily by the growth in advances. Rao said that the advances in the current financial year would increase by about 25 per cent to Rs 17,656 crore (Rs 176.56 billion).
He added that the prospects for next fiscal looked good in the light of expansion plans drawn up by different industrial sectors.
Indian Bank currently has a capital adequacy ratio of 15.1 per cent. Rao felt that it was difficult to accurately assess the capital that would be required to meet Basel II norms that are to be implemented about two years from now.
The general view is that banks' capital requirements would increase by about 250 basis points, said Rao. However, it is early to gauge the operational risk that would go in to calculating capital adequacy under Basel II norms, he said.
If Indian Bank does go through with an equity issue next year, it would dilute the government's 100 per cent stake.
Rao declined to comment on the possibility of Indian Bank acquiring one of the old private sector banks. However, he said that eventually Indian Bank would also consider acquisitions as a way to drive growth.