Allahabad Bank’s plan to raise equity capital which will improve its tier-I capital reasonableness ratio by nearly half. The bank’s tier-I capital ratio will inch up to 13 percent from 7.15 percent after the two issues worth Rs. 4,000 crore and Rs. 7,000 crores by the government.
The government under its recapitalization scheme had infused Rs. 6,896 crore into the entity in February, helping it to steer out of the Reserve Bank of India’s Prompt Corrective Action framework, under which it was restricted from lending to certain high-risk categories. From this amount Rs. 2750 crore was allocated towards provisioning of bad loans in order to bring down its net non-performing asset ratio below the PCA threshold. Remaining Rs. 4,146 crore was used to boost its capital base and enhance the capital to risk-weighted asset ratio above the minimum regulatory limit of 10.87 percent.
The public sector lender on Tuesday said, “it will allow new equity shares by way of public issue, rights issue, qualified institutions placements or in combination in one or more tranches to raise Rs 4,000 crore.”