Canara Bank, a public sector lender, intends to raise up to Rs3,000 crore in capital in the second half (October 2022—March 2023) through additional tier I (AT1) and tier II bonds to fund accelerated lending expansion. The bank has already raised Rs 6,000 crore using these instruments in the first half of the year with the goal of maintaining capital adequacy at a level of at least 16%.
It issued AT1 bonds at an early-month coupon rate of 7.99%, raising Rs2,000 crore in capital. Compared to AT1 bonds released in July 2022, which were priced at 8.24 percent, this yield was 25 basis points cheaper. Future efforts will focus on issuing bonds at lower rates (less than 7.99%) due to the lender's strong credit and financial standing, according to bank officials.
State Bank of India, a different public sector institution, sold AT1 notes for Rs6,872 crore at a cut-off rate of 7.75 % on September 7. According to Canara Bank management, several of its competitor banks, including private lenders, have high capital adequacy ratios (16 percent and above), and the market has expressed a desire for Canara Bank to maintain CAR at comparable levels.
Canara Bank's CAR will increase to over 16% this month as a result of the capital obtained through AT1 bonds. By June 30, 2022, it had tier-I capital adequacy of 14.91%, tier-II capital adequacy of 2.78%, and tier-I capital adequacy of 12.13%.
The public sector lender with headquarters in Bengaluru has received authorization to issue tier-II bonds and AT1 bonds totaling up to Rs 9,000 crore in FY23. In June 2022, the loan book of the bank increased 14.47% year over year. As of June 2022, the number of its outstanding advances was Rs7.83 trillion. Prior to the holiday season, there was significant demand for cash (loans), and according to bank authorities, credit growth will likely exceed the rate witnessed through June 2022.
According to figures from the Reserve Bank of India, the banking system's loan growth reached a multi-year high of 16.2% YoY for the fortnight that ended on September 9. Credit growth recently reached a 16 percent rate in November 2013. Banks have so far granted loans totaling more than Rs6.5 trillion in the current fiscal year, an increase of 5.5% YoY.
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