Central Bank of India to raise Rs2,500 cr from rights issue

Central Bank of India to raise Rs2,500 cr from rights issue

New Delhi: State-owned Central Bank of India on Friday said that it would come out with a rights issue in the next few months to raise Rs2,500 crore.

“That (rights issue) we are working out," Central Bank of India chairman and managing director S Sridhar said after opening a bank branch at the headquarters of the organising committee of the Commonwealth Games 2010 here.

He stated that the bank is planning to raise Rs2,500 crore from the rights issue, which would be out in the next few months.

Stating that the details are yet to be worked out, he said that they are required to obtain regulatory approval and complete other formalities before holding the issue.

The central government holds about 80% stake in the Central Bank of India. Hence, it will make a capital infusion of Rs2,016 crore by subscribing to the rights issue.

Another Rs500 crore may be raised from existing retail shareholders and FIIs, who own the remaining 20% stake in the bank.

Last week, the government had announced a capital infusion of Rs6,211 crore in five public sector banks, including Rs2,016-crore capital support to Central Bank of India with the objective of raising Tier I capital of over 8%.

The Tier I capital of the bank is about 6.6%, he said, adding that it will cross 8% after the rights issue.

With the infusion, the bank would be able to increase the balance sheet size by about 10-12 times of the amount raised by way of equity.

Earlier this month, the government had infused Rs250 crore into the bank to shore up the capital.

Sridhar said that though there is an upward bias on interest rate, it would not go up till July.

Liquidity, which is tight this month, may ease next month as money would flow back into the system, he added.