Central Bank of India plans to raise Rs 2,500 crore through rights issue in the fourth quarter of the current fiscal to augment capital adequacy to support business growth.
Post the rights issue, capital adequacy ratio of the bank will increase by 100 basis points to 12.65 per cent from 11.65 per cent as of September-end 2010.
“The Government has given us the green signal for the rights issue. Now we are awaiting the Reserve Bank of India's approval for the same,” said Mr R.K. Dubey, Executive Director, Central Bank of India, on the sidelines of the Indian Banks' Associations Bankers' Conference 2010.
Capital infusion will help support the bank's target of achieving a year-on-year credit growth of 25 per cent in FY2011.
Pointing out that the bank has enough headroom (the Government holds 80 per cent stake in the bank) to go in for a follow-on offer), Mr Dubey said the capital position and credit growth situation will be reviewed before arriving at a decision on the FPO.
Central Bank of India is re-working its reverse-mortgage scheme to make it more attractive for the senior citizens. The bank plans to tie-up with life insurer Star Union Dai-Ichi to structure annuities for senior citizens against their property, Mr Dubey said.
Reverse mortgage, according to the National Housing Bank, is a financial product that enables senior citizens who own a house to mortgage their property with a lender and convert part of the home equity into tax-free income without having to sell the house.
Reworking reverse mortgage
Instead of the senior citizen making monthly payments to a lender, as with a regular loan, the lender makes payments to him/her. Maximum period of the loan is 20 years. The loan is not required to be serviced as long as the borrower and his/ her spouse are alive and in occupation of the property. On the death of the borrower and his/her spouse, the loan is repaid through sale of property.
SME Lending
The bank plans to step up focus on lending to small and medium enterprises (SMEs) in partnership with non-banking finance companies. In the works is a tie-up with the NBFC arm of the Future Group. Under the proposed ‘public-private partnership' arrangement, the SME loans originated by the NBFC will be taken-over by the bank, said Mr Dubey. Central Bank already has a similar tie-up with Bajaj Finserve.
The bank has also entered into a tie-up with commercial vehicles maker AMW to finance purchase of trucks by small transport operators, a segment which is classified as SME.
Business Process Re-engineering
The bank will soon embark on a BPR exercise so that the services of manpower, freed from routine operations on account of all branches being put on the core banking platform, can be utilised for cross-selling of products and services. All branches will be on the CBS by December-end.
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