Mumbai: State-run lender Central Bank of India has said it is in the process of selling 4% of its stake to Life Insurance Corp. of India (LIC) through an institutional placement for 581 crore to meet its capital requirement of 2,000 crore this fiscal.

“We will be needing 2,000 crore for our business plans this financial year. We did go to LIC and we are getting around 581 crore from them," Rajeev Rishi, chairman and managing director, Central Bank of India, said.

He, however, did not specify a timeline for the deal. The state-run bank will receive funds from the life insurance company through private placement of shares and it will bring down the government holding to 84% from the current 88%.

Rishi said once the bank gets funds from LIC, it will then approach the government for around 1,500 crore of additional capital. The government has earmarked only 11,200 crore for fund infusion into public sector banks this current fiscal, down from 14,000 crore in the last fiscal. Rishi said he is hopeful of getting 1,500 crore from the government but in case the bank does not get the full amount, it would look for other options.

“Even if we assume that the government is not able to meet our entire requirement, then also we have enough resources, such as divestment of stake in Infrastructure Leasing and Financial Services (IL&FS), to raise funds," he said.

Meanwhile, the bank reported an over eight-fold jump in its net profit at 192 crore in the June quarter as against 22 crore in the same period in the last fiscal. The sharp increase in the profit was on account of low base effect in the first quarter of the last fiscal. Its net interest margin, which is the difference between what it pays to depositors and what it earns from on-lending, improved to 2.87% in the reporting quarter from 2.68%. Gross non-performing asset in the quarter rose to 6.15% from 6.03% in the year ago period, but net non-performing assets (NPAs) declined to 3.62% from 3.85% as the bank could recover 208 crore. Rishi said the bank plans to contain its gross NPAs at 5.61% and net NPAs at 3.08% in the current fiscal. Its capital adequacy ratio stood at 9.62% at end-June.

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