With expectations of additional economic uncertainty as the second wave of the Covid-19 pandemic continues and expectations of a third wave, banks are looking to raise funds to improve their capital reserves and fund their plans for expansion.
Private-sector lender Federal Bank said its board of directors will meet on June 16 to consider proposals for the bank’s preferred share issuance and capital raising either by rights issue. , private placement, preferential issue, additional public offering, Qualified Institutional Placement, global certificates of deposit, US certificates of deposit and bonds convertible into foreign currencies.
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The board will also consider a proposal to borrow or raise funds in Indian currency or any other permitted foreign currency through the issuance of debt instruments, including, but not limited to, Tier Bonds. I, Level II Bonds, Long Term Bonds (Infrastructure and Affordable Housing), Masala Bonds, Green Bonds, Non-Convertible Debentures, or any other debt obligation that may be authorized by RBI from time to time, on the domestic market and / or the foreign market, on the basis of a private placement, he said in a filing.
More plans to come
In recent weeks, other lenders have also announced their intention to raise funds and the expectation is that others will finalize their plans soon. Private sector lender Yes Bank said on June 10 it had received approval from its board of directors to raise 10,000 crore through debt securities.
Likewise, the public sector Canara Bank also announced the approval of the board of directors for its capital raising plan for 2021-2022, amounting to 9,000 yen crore in the form of equity and equity instruments. debt.
Bank of Maharashtra is also looking to raise up to 2,000 crore through the Qualified Institutional Pathway by the end of July. Reserve Bank of India Governor Shaktikanta Das on June 4 also urged banks and NBFCs to build capital reserves and ensure adequate provisioning to deal with the challenges emanating from the second wave.
“Building up adequate provisioning reserves and capital, as well as good corporate governance in financial entities, has become much more important than ever before, especially as banks and NBFCs are in the at the forefront of our efforts to mitigate the economic impact of Covid-19, “he said on June 4.
Public and private sector lenders had also raised funds in 2020-2021 amid economic uncertainty caused by Covid-19.
“The banks have to increase their capital because there could be stress resulting from the second wave,” Das told reporters after the monetary policy announcement. Their overall capital is currently at a very stable level, he added.