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BOI to raise up ₹3,000cr via tier 2 bonds to support business growth
June 12, 2023
Public sector lender Bank of India plans to raise upto ₹3,000 crore in capital through tier II bonds in the current financial year to support business growth.
The Mumbai-based lender has board’s approval in place to raise up to ₹6,500 crore in FY24, of which ₹4,500 crore would be through additional tier-I bonds/equity and balance via tier II bonds. The tier II bond issuance would be subject to market conditions, bond market sources said.
Its total capital adequacy ratio (CAR) stood at 16.28 per cent, with tier I of 14.41 per cent and tier II of 1.87 per cent at the end of March 2023. The capital requirement is linked to risk-weighted assets (RWA). Its RWA grew by 12.05 per cent YoY to ₹3.54 trillion at end of March 2023.
Rating agency CARE has assigned “AA+” rating to the proposed offering of Basel III-compliant tier II bonds. BOI had issued tier II bonds for Rs 1,800 crore in FY22. It redeemed tier II bonds worth ₹2,500 crore in FY22.
Tier-II bonds under Basel III are characterised by a point-of-non-viability (PONV) trigger due to which the investor may suffer a loss of principal.
According to data collated by JM Financial Services group, commercial banks in India issued tier II bonds worth ₹16,319 crore in FY22 and ₹59,686 crore in FY23.
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