Resources for Basel II Capital Accord (Basel II)

Banks on a fund raising spree to meet Basel II norms

www.financialexpress.com

With the deadline to comply with Basel II norms geting closer, banks have started banking on tier I and tier II funds to push up their capital adequacy ratio (CAR). While some banks like the Punjab National Bank (PNB) and Union Bank of India (UBI) have already raised capital through tier I and tier II bonds, others are actively looking at raising capital in the coming months either through rights issue or tier I or tier II bonds.

PNB, early this month raised about Rs 300 crore through tier I perpetual bond series II and Rs 500 crore through upper tier II bonds through private placement aggregating Rs 800 crore. Similarly, UBI has raised capital to the tune of Rs 600 crore through tier I and tier II bond issues. The public sector bank raised Rs 200 crore through perpetual tier-I bonds at a coupon rate of 9.90% with step-up option of 50 basis points at the end of 10th year and Rs 400 crore through lower tier II bonds with a tenure of 10 year and 4 months. The tier II bonds carried a coupon rate of 9.35%. The main purpose of raising additional capital was to meet Basel II norms as also support business growth. The CAR of the bank at the end of September 2007 stood at 11.56%.

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