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Monday, September 22, 2014

Vijaya Bank may delay fund-raising plan

Vijaya Bank may postpone plans to raise funds for its tier 1 and tier 2 capital requirements, “as the market condition is not really conducive at present”, said V Kannan, Chairman and Managing Director.

The public sector bank is waiting for the opportune time to raise ₹600 crore through Qualified Institutional Placement (QIP) for its tier 1 capital requirement and to mop up ₹500 crore through bonds for its tier 2 capital.

The bank was earlier planning to raise Rs600 crore in October, but it may wait for some more time for the market to be better, he said.

The bank has obtained necessary approvals for the fund-raising plans. Though the bank is adequately funded for the current year, it may have to raise capital for the next year, considering the growth in business, said Kannan.

It hopes to grow 17 per cent this year. He was in town to deliver the P Brahmayya Memorial Lecture, organised by the Institute of Chartered Accountants of India.

In the lecture, he said while the technology has brought in major revolution in the working system of the banks, the fundamental aspects of banking, which is the trust and confidence of the people, remains the same. Also, there is a need to relook at the way companies and individuals are funded by banks, coupled with the need for improving the asset quality.

The reasons for default by the customers are both external, which are to an extent uncontrollable, and also controllable factors such as higher leverage by the customers, bad management of funds and wilful defaults.

“In recent years, there has been an increase in the amount of debt restructured under the CDR mechanism. This calls for radical overhaul of the risk management practices by banks,” Kannan added.

Source : The Hindu

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