Karnataka Bank Ltd (KBL) expects a credit growth of 15-17 per cent during the current fiscal.
Replying to a query by a shareholder on the sluggish credit growth during 2020-21 at the 97th annual general meeting of the bank on Thursday, Mahabaleshwara MS, Chief Executive Officer and Managing Director of the bank, said KBL utilised the pandemic-affected year 2020-21 for realignment of its credit portfolio.
Portfolio realignment
He said the bank was slightly tilted towards large advances, and it realigned towards retail and mid-corporate advances during 2020-21 by having about 5.99 per cent credit growth under retail, and about 6 per cent in mid-corporate sector.
Terming retail and mid-corporate as focus areas of the bank, he said the bank observed that delinquency is less in these segments, and it would also help the bank on improved yield on advances. Risk is also highly diversified.
Realignment of the portfolio was the reason for the sluggish credit growth during the 2020-21, Mahabaleshwara said.
“Now we have projected a credit growth of 15-17 per cent,” he added.
Increase borrowings limit
The 97th AGM also sought shareholder approval to borrow amounts not exceeding, in aggregate, ₹6,000 crore over and above the aggregate of the paid-up capital of the bank, free reserves and the securities premium.
Terming it as an enabling resolution, Mahabaleshwara said this is a resolution to facilitate the ordinary course of banking business. As of March 31, the total borrowings of the bank was ₹1,764.88 crore against the limit of ₹2,000 crore as approved by shareholders in the 95th AGM held on August 7, 2019. This consists of subordinated tier-2 debt instruments of ₹970 crore raised for the purpose of augmenting capital funds, and refinance availed from eligible financial institutions.
Also see: SBI eyes ₹3 lakh cr in farm credit by FY24
“Although the bank has sufficient liquidity, and does not have borrowings in the immediate future, the bank may consider the refinance option as a competitive tool when interest rates are conducive.
“Here, I also wish to state that as on the date of this meeting, there is no proposal for raising capital via bonds. However, in case, if the bank wishes to explore various options, bonds or debentures route is also kept in mind, considering various financial management aspects,” Mahabaleshwara said.
This resolution is only an enabling resolution in the ordinary course of banking business, he said, adding the existing borrowings of the bank will be subsumed within the proposed limit of ₹6,000 crore.
QIP
Speaking on another resolution seeking shareholder approval to raise equity capital by issuing 15 crore shares through a qualified institutional placement (QIP), Mahabaleshawara said it is an enabling, forward-looking resolution.
As of March 31, the capital adequacy ratio (CAR) of the bank stood at 14.85 per cent, which is well above the minimum regulatory benchmark of 10.875 per cent. He said the bank has been ensuring the ratio remain at least 1 per cent above the minimum regulatory benchmark as a matter of prudence, and added that KBL is well capitalized.
Stating that the board at various intervals has felt the need for on-boarding a few institutional investors, mainly to broad base the shareholding, by having approval of the shareholders for this QIP resolution the board can take a swift decision at the opportune time by thoroughly evaluating the suitability of the investors, pricing and quantity of dilution in the tranches etc., to the best advantage of the bank and its stakeholders.
“The resolution, once approved by the shareholders, will be valid for a period of one year and the board can take an informed decision at an appropriate time as and when the need arises. With this enabling resolution, the bank will be able to save its time and efforts towards obtaining shareholders’ approval via postal ballot,” he added.
