Bank of Baroda expects Rs 10,000 crore capital from government

State-run lender, Bank of Baroda has requested the government to inject Rs 10,000 crore equity from its recapitalisation plan in the current financial year, the bank’s Executive Director Papia Sengupta said on August 26.

Bankers are expecting capital infusion as early as September after Finance Minister Nirmala Sitharaman last week said public sector lenders will receive upfront equity as part of measures to boost credit flow to the economy. The government has earmarked Rs 70,000 crore for recapitalisation of public sector banks.

The capital adequacy ratio of Bank of Baroda, that merged with Dena Bank and Vijaya Bank at the start of the current financial year, slipped to 11.5 percent as on June 30, from 13.42 percent in the previous quarter. Its common equity tier-1 (CET-1) ratio slipped to 8.49 percent in the first quarter, from 10.38 percent in the March-ended quarter.

As per regulatory norms, banks are required to maintain minimum CET-1 at 5.5 percent, with a minimum total capital ratio at 9 percent and capital conservation buffer at 2.5 percent.

In March, the government had injected Rs 5,042 crore in Bank of Baroda, in which it holds 69.23 percent stake.

Sengupta said the bank is in talks to tie up with 16 non-banking finance companies (NBFCs) and Housing Finance Companies (HFCs) for co-origination of retail and MSME loans. It has announced a collaboration with Srei Finance and Edelweiss Financial Services, while talks are on with the others. These include Cholamandalam Investment & Finance, Indiabulls Housing Finance, Adani Capital, Avanse Financial Services and Capri Global Housing Finance.

The bank aims to sanction Rs 1,000 crore in loans via co-origination route in the second quarter of the current financial year. It also plans Rs 5,600 crore worth of asset purchases from NBFCs under the partial guarantee scheme introduced by the government in the Union Budget 2019-20.