Rao: Cash hunt

Mumbai, Sept. 26: Canara Bank plans to raise $300 million through a combination of medium-term notes (MTNs) and perpetual bonds in November to shore up its capital. The Bangalore-based bank has already raised Rs 1,075 crore from the domestic market.

Following the issue, Canara Bank’s capital adequacy ratio will be over 12 per cent, chairman and managing director M.B.N. Rao said on the sidelines of the Conference on Global Banking jointly organised by Ficci and Indian Banks’ Association (IBA) here today.

“The MTN programme is on. Legal due diligence is underway and the rating exercise will be complete by next month,” he said, adding that the rating for the issue is being carried out by Fitch and Moody’s.

Of the Rs 1,075 crore that has already been raised, Rs 575 crore qualified for lower Tier II capital while Rs 500 crore was upper Tier II capital.

However, of the $300 million that will be raised, $200 million will be upper Tier II capital while $100 million will be raised via perpetual bonds.

Canara Bank’s Rs 500-crore domestic issue is for a tenor of 15 years where the call option lies at the end of 10 years. It carries a coupon rate of 9 per cent and the coupon payment is on an annual basis. Funds raised from these issues will be used to meet capital requirements. They will also fund overseas expansion and long-term cash requirements for overseas operations.

Regarding his outlook on interest rates, the Canara Bank chief said interest rates are likely to remain stable with inflation well under control.

Rao said there is scope for about 20 per cent credit growth because of low historical base and opportunities are still available despite a 30 per cent increase in lending. He said with banks looking at global operations and scale, sustenance of profits requires attention on declining spread and that banks should look at bringing down costs.