Bank of Maharashtra is planning to raise funds aggregating Rs 4,000 crore over the next five years via capital infusion from the Government and the capital markets, according to Chairman & Managing Director Sushil Muhnot.
The Pune-headquartered public sector bank needs resources to strengthen its capital adequacy under the Basel III global regulatory framework for banks as also to support business growth.
Speaking on the sidelines of a MSME & life insurance summit on Saturday, Muhnot said about half of the required capital of Rs 4,000 crore will come from the Government by way of capital infusion and the balance will be raised from capital markets.
As on March-end 2015, the bank’s capital adequacy ratio was at 11.94 per cent as against the required regulatory requirement of 9 per cent.
In FY2015, the Government had infused Rs 6,990 crore in only nine out of the 22 public sector banks (PSBs) in the country. The capital infusion was based on new criteria – weighted average of return on assets for the last three years and return on equity for the last financial year.
Bank of Maharashtra was not among the banks that received capital. The banks that were recapitalized included State Bank of India (Rs 2,970 crore), Bank of Baroda (Rs 1,260 crore), Punjab National Bank (Rs 870 crore), and Canara Bank (Rs 570 crore),
For the current financial year, the Government has budgeted for recapitalization of Rs 7,940 crore in PSBs.
Since the budgeted amount will not be enough to recapitalize all PSBs, the Government asked banks to make presentations to the Department of Financial Services in the mid-June to early July period to assess their capital requirement.
Earlier this month a senior finance ministry official said that any shortfall in raising resources from the equity markets by PSBs could be made good by the government.
This statement assumes significance as PSBs currently may not be in a position to tap the equity markets due to valuation concerns arising from rising bad loans and low credit offtake.
Credit growth
On the loans front, while corporate credit growth continues to be sluggish, the BoM chief said retail loan growth is healthy. MSME (micro, small and medium enterprises) loan growth is satisfactory.
The new sectors from where loan demand is coming from are – renewable energy (solar and wind energy) and roads segment.
Muhnot pointed out that with renewable energy producers signing power purchase agreements with various state-owned distribution companies and inputs not being an issue, bank financing to the segment could go up three times this year as compared to last year.