The Tayals who are the promoters of Bank of Rajasthan (BoR) are on course to pare their shareholding in the private sector bank from 44% to close to 15% by end-March 2009, the deadline for implementing new global banking norms popularly known as Basel II.
The plan to dilute equity holding is to conform to the banking regulator’s directive to promoters of all private banks to reduce their shareholdings to close to 10%.
“We have given a road map on dilution of equity stake to RBI, and are now in advanced stages of negotiations with investors for a preferential issuance,” said BoR managing director and chief executive officer BM Sharma.
Most private sector banks have now adhered to the regulator’s rule which aims at lowering of the promoter’s stake in the bank. BoR and IndusInd Bank are among the only ones which are left.
BoR is understood to be in talks with a clutch of foreign banks and funds for the preferential issue which will help bolster its capital base beside reducing the promoter’s stake. Also commercial banks in India will have to adhere to Basel II, the new international framework on capital adequacy norms for banks, by March 31, 2009.
The new norms require most banks to set aside more capital for their present level of business. Besides the proposed issuance of preferential shares, BoR is also working towards dilution of promoters equity, said an official.
BoR’s net worth is close to Rs 456 crore. Its capital base was close to Rs 107.57 crore at the end of March 2007. “The 1:4 bonus offer (one equity for every four equity shares held) will help expand the capital base to Rs 134 crore, once the allotment is complete,” said Mr Sharma.
The bank’s capital adequacy ratio is 13.78%, while the gross Non-Performing Assets (NPAs) or bad loans were 0.6% at the end of March 2007. Its deposit base is close to Rs 11,197 crore and advances Rs 5,467 crore.
Source: Economic Times