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Basel III: Highest equity dilution likely in BoI, Canara, Union banks 

April 3, 2014
Sheetal Agarwal, Business Standard

The deferral of deadline for banks to comply with Basel-III guidelines to March 2019 (from March 2018 earlier) does not solve the capitalisation problem faced by most banks — especially public sector banks (PSBs). The focus for the PSBs will shift from Tier-I capital ratio to core

Tier-I ratio (which refers to core equity capital of the bank) given that the Reserve Bank of India (RBI) has prescribed a core Tier-I ratio of 8.9 per cent, higher than Basel-III requirement of 8.5 per cent.

Brokerages estimate that PSBs might have to raise anywhere between Rs 1,80,000 crore and Rs 2,00,000 crore by FY18 to comply with these guidelines. Estimates of equity dilution (arising from fund raising) vary, given assumptions of brokerages on return on equity, non-performing assets ratio and the price at which dilution takes place. However, most brokerages believe that among the top six PSBs, Bank of India (BoI), Union Bank (Union) and Canara Bank (Canara) are the weakest on the capital adequacy front and would witness highest equity dilution.

Read more: Business Standard

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