Public sector Jammu and Kashmir Bank is looking to raise up to Rs 4,500 crore through equities and debt, according to its annual report. The bank will seek shareholders' approval for the fund raise proposal in its annual general meeting to be held on September 28, 2020, the lender said in its Annual Report 2019-20.
The implementation of Base III guidelines has necessitated the need for banks in India to augment their capital base. This becomes important as Base III capital requirements call for increase in quantity and quality of capital, besides providing for capital buffer during economic downturn, the lender said in its report.
In the light of the economic and business environment in India besides the downward pressures in the financial sector, increase in NPAs, slow growth in overall business variables, among others, the bank gauges the capital requirements for the near to medium term from time to time, it said.
Based on these factors in the capital planning exercise carried out, the bank needs to augment its capital base in phases up to March 31, 2021, it said. The bank will augment the capital base by raising common equity issue of additional tier-1 bonds or issue of tier-2 bonds and through internal profit accruals.
"The current issue of raising capital is part of tier-1 and tier-2 capital raising exercise for augmenting bank's capital base, to the extent of Rs 4,500 crore..." the report said. The fund raise is proposed through various modes including "follow-up issue, rights issue, preferential issue to government of J&K, issue to financial institutions/employees (ESPS)/public, institutional placements, and other permitted mode of raising capital including mobilisation of around Rs 1,000 crore of Tier II capital based on the market conditions", it said.
India has been implementing the globally accepted banking norms under the Basel III guidelines. Base III capital requirements call for increase in quantity and quality of capital, besides providing for capital buffer during economic downturn.
"The board of directors of the bank believes that the proposed issue is in the interest of the bank and hence, recommends the resolutions for the approval of the shareholders by way of special resolution," it said.
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