Companies & Sectors
IDBI Bank to raise $580 million from overseas bond sale

The public sector lender is also mulling to increase the size of MTN programme to $2.5-3 billion from the present $1.5 billion from next January

Mumbai: Public sector lender IDBI Bank said it plans to raise $580 million from the overseas market this fiscal as part of its $1.5-billion overseas bond sale programme, reports PTI.

 

The bank raised $200 million (250 million Singapore dollars) for a three-year maturity with a coupon of 3.65% from the Singapore market on 21st August, making it the first domestic bank to raise funds in Singapore dollars.

 

The issue got a sound response with demand for the issue touching 3 billion Singapore dollars or 12 times the issue size, the bank said.

 

"With this round of fund raising from the Singapore market, the total fund raising through medium-term-note programme (MTN) had reached $920 million out of the total $1.5 billion. We are likely to raise the rest of the amount ($580) in the current financial year," executive director Melwyn Rego told reporters.

 

HSBC, DBS, StanChart were the lead managers to the issue.

 

Talking about initiatives taken up by the bank to raise the rest of the amount, Rego said the bank was in advanced stage of discussions with a multilateral funding institution and also planning to enter into a new market to raise money which has not been tapped by any domestic bank yet.

 

The public sector lender is also mulling to increase the size of MTN programme to $2.5-3 billion from the present $1.5 billion from next January.

 

"Normally, we renew our MTN programme in January. So, we are planning to increase it to $2.5-3 billion next January," Rego said.

 

Elaborating the significance of recent fund raising from the Singapore market, Rego said it was first of its kind among the domestic banks and the coupon was very attractive.

 

Talking about utilisation of proceeds from the bond sale, deputy managing director BK Batra said the fund raised would be deployed in normal business operations.

 

"The proceeds will be utilised for normal business operations. We are also witnessing sound demand from clients for the overseas funds," Batra said.

 

IDBI Bank's MTN issue in Singapore comes on the heels of the SBI, ICICI Bank, Axis Bank, IOB and UBI raising $3.10 billion over the past one month while Exim Bank had raised another $500 million early this month.

 

Others like Bank of Baroda and Bank of India and companies like Rural Electrification Corporation, Jindal Steel & Power and Power Finance Corp are also waiting to mop up funds from international markets.

 

The biggest fund raiser so far this year has been Reliance Industries, which had mopped over nearly $5 billion since February this year.

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RBI says real lending rates nearly halved in FY12 to 3.8%

RBI said contrary to claims, the real interest rates of commercial had been heading south in FY12 from their high during the pre-crisis period of 2003-04 and 2007-08

Mumbai: The Reserve Bank of India (RBI) has proved wrong its critics, who have been flaying it for sharp growth dip and blaming it on the tight monetary policy, saying real lending rates nearly halved in FY12 to 3.8% from about 7% in the pre-crisis period, reports PTI.

 

The RBI has been under constant criticism for its hawkish stance on inflation, resulting in higher lending rates, which in turn pulled down growth rates beginning the middle of last fiscal.

 

Real lending rate is calculated by subtracting inflation from the banks' lending rates.

 

Attributing this decline to the elevated inflation rates and deceleration in growth, the RBI annual report for FY12, released last evening said, contrary to these claims, the real interest rates of commercial had been heading south in FY12 from their high during the pre-crisis period of 2003-04 and 2007-08.

 

"The real or net of inflation weighted average lending rate (WALR) increased only moderately to about 3.8% in 2011-12, but remained lower than the average of about 7 percent in the pre-crisis period of 2003-04 to 2007-08," the report said, quoting its own calculation of the weighted average lending rates of banks.

 

Attributing this fall to an investment boom during the pre-crisis period, the report said "the fall in real lending rates in post-crisis period is even sharper if GDP deflators are used to calculate inflation instead of WPI.

 

"The fact is that real lending rates have secularly declined since 2003-04. During this period, investment boomed initially, but stalled in recent years even though real rates continued to decline," the report said.

 

However, the report admits that according to an exercise undertaken by the RBI to calculate the WALR of banks using the accounts-level data from basic statistical returns, the effective lending rate in nominal terms rose in FY12 in response to monetary tightening.

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Banks need Rs1.75 trillion in fresh capital to meet Basel III: RBI

According to the central bank, public sector banks -- which control nearly 70% of the operations -- will collectively need equity up to Rs1.5 trillion, while the private sector will require up to Rs250 billion in common equity capital to meet Basel III norms

Mumbai: For the first time, the Reserve Bank of India (RBI) has quantified the cost of implementing Basel-III norms, pegging the recapitalisation needs of the banking system at Rs1.75 trillion, but added that it is manageable, reports PTI.

 

"Implementation of Basel III would be challenging but manageable," the Reserve Bank said in its annual report for FY12, released last evening.

 

The report said the public sector banks -- which control nearly 70% of the operations -- will collectively need equity up to Rs1.5 trillion, while the private sector will require up to Rs250 billion in common equity capital.

 

On the non-equity capital front, state-run banks will require Rs2.65-2.75 trillion while the same figure for private lenders will be Rs500-Rs600 billion.

 

The figures are based on assumptions like a 20% jump in every bank's risk weighted average every year and a normal internal accruals.

 

The RBI issued the final sets of guidelines for the implementation of Basel-III norms -- formulated after the 2008 credit crisis and aimed to reduce the risk of financial collapse -- for Indian banks in May 2012.

 

As per the final RBI guidelines, which ask banks to keep capital one% above what has been prescribed by the Basel committee, banks are supposed to implement the guidelines starting March 2013 in a phased manner and should be fully compliant by March 2018.

 

In the annual report, RBI also addresses the demand from certain quarters for lower capital requirements for state-run banks. It said it is "committed towards developing a level-playing regime for all banks irrespective of their ownership patterns."

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COMMENTS

anantha ramdas

5 years ago

Most banks have enormous amounts of money in Reserves. There is no apparent laid down rules that stipulates the ratio between the paid up capital and reserves. And why not?

I feel that some kind of rule should be enacted that would make it mandatory for banks or other coporate bodies to capitalise the reserves - by issuing bonus shares - when they need capital, instead of going in for private equity or other forms of placements.

Their justification for doing so is the obtaining of private equity is less time consuming and less expensive than the procedure for making identical offer to existing shareholders. I feel shareholders have the first lien over such issues, but because it is not mandatory the Board can do what they please.

Similar is the case for when corporate bodies indulge in share buy-outs, approved by the Board. Why not SEBI or whoever is responsible make it OBLIGATORY for majority shareholding directors to also surrender their shares when buy-outs are "sponsored" by them?

the ordinary retail investor is weak link in the chain and is taken for granted.

the whole system needs to be revamped.

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