A slew of private sector banks is set to hit the market -- both domestic as well as overseas -- to raise capital and bring down the owners' stakes.
This is to conform to the Reserve Bank of India's guidelines on ownership in private sector banks, which stipulate that no single entity should hold more than 10 per cent in a bank.
Federal Bank, Bank of Rajasthan, United Western Bank, Bank of Punjab, Catholic Syrian Bank and Lord Krishna Bank are planning to raise capital to dilute promoter holding and boost the capital base.
The regulator wants commercial banks to have a net worth of Rs 300 crore (Rs 3 billion) over a three-year period.
Federal Bank and Bank of Rajasthan are planning overseas issues. "Federal Bank will raise capital in the next six months to support bank's growth plan and adhere to the Basel II norms," said Federal Bank Chairman M Venugopalan.
"We would consider a global depository receipts as one of the options," he added.
ICICI Bank holds around 20 per cent stake in Federal Bank. Fresh infusion of capital will lead to dilution in share holding and thus enable the bank to adhere to the ownership guideline said a banking source.
Bank of Rajasthan is also planning to raise Rs 1,000 crore (Rs 10 billion) through an overseas or domestic issue. "Fresh capital infusion will enable the bank to support the growth plans and also dilute the promoter holding which currently stands at around 44 per cent," said Bank of Rajasthan Chairman Pravin Kumar Tayal.
"United Western Bank has decided to raise Rs 380 crore (Rs 3.8 billion) in two phases to support the bank's growth plans and adhere to the RBI guidelines," said United Western Bank's Company Secretary R Joshi.
The bank will raise Rs 255 crore (Rs 2.55 billion) in the current financial year and Rs 125 crore (Rs 1.25 billion) in the subsequent year, said Joshi. The bank is evaluating the option of raising capital through preferential allotment, rights or second public offering, he added.
Lord Krishna Bank as appointed investment banker DSP Merrill Lynch look for a strategic investor for the bank. It is planning to rope in GE as a strategic investor in the bank, said banking sources.
The major shareholders in LKB -- Mohan Puri, director, and Dabur Group -- holds 65 per cent and 6 per cent, respectively.
UTI Bank in March 2005 raised around $ 256 million through GDR. Centurion Bank too raised around $300 million through a GDR to boost its capital base to Rs 300 crore (Rs 3 billion).
Capital infusion led to 20 per cent dilution in UTI Bank's shareholding. Post capital infusion, majority shareholder UTI-I's stake in the bank came down to around 27 per cent (33.32 per cent), LIC's holding diluted to about 11.50 per cent (13 per cent ) and HSBC holding came down to 12 per cent (14 per cent).