News Hour- Central Bank of India to seek Rs 700 crore from government

KOLKATA: State-run lender Central Bank of India said it will seek Rs 700 crore capital from the government while it needs about Rs 1,200 crore to grow credit by 20% this financial year.

Chairman and managing director MV Tanksale said his bank has enough headroom for raising subordinated debt or tier II capital but no bank is keen to use this option as the imminent Basel 3 regime emphasises on core capital. Indian banks will adopt Basel 3 from January 2013.

If the government accepts its plea, it will invest in pure equity by subscribing to preference shares issued by the bank. The balance would come from internal accruals, which gets added to tier I capital too. The government holds 79% in the bank.

"The compulsion for banks is now to create capital out of profit generation," Tanksale said on Friday. "For this fiscal, we plan to seek Rs 700-800 crore from the government while the rest will come from profits."

The senior banker, who was in Kolkata Friday to attend a Ficci seminar, targets a 18-20% credit growth this fiscal, more that Reserve Bank of India's projection of 17%. But the slow deposit growth made him concerned.

He said deposit growth is not commensurating with credit growth as high inflation led people towards physical savings instead of financial savings.

The Mumbai-based entity with a 31% share of high cost bulk deposits said it would not able to reduce the share to 15% by March 2013 as directed by the government.
(Source:economicstimes.indiatimes.com)