DCB awaiting RBI nod for Rs 308.5 cr preferential allotment

New Delhi, July 12 (UNI) Mumbai-based Development Credit Bank Ltd (DCB) is awaiting the nod from RBI for its decision to allot preferential shares amounting to Rs 308.5 crore to enhance the Bank's retail banking and small and medium enterprise (SME) lending, said a top official.

Subject to RBI approval the bank's shareholders would vote on the matter in an AGM to be held on August 9, said the Bank's Managing Director and Chief Executive Officer Gautam Vir. The fresh infusion of capital will enhance the Bank's retail banking and SME lending.

The Board of DCB has approved raising of Rs 308.5 crore by issuing preferential shares to five investors, namely Tata Capital, Aga Khan Fund for Economic Development (Akfed), GRA Finance Corp, DCB Investments, and India Capital Opportunities at Rs 105 per share.

''Once the approval of RBI comes through, the allotment of shares will be done between August 24 and September 10,'' Mr Vir said.

The Bank's capital adequacy ratio, which is currently at 10.5 per cent, will go up to 18.5 per cent after the capital infusion and the Bank's net worth will increase to Rs 635 crore after the issue. The existing promoter's stake in DCB will come down to 24.8 per cent from 29 per cent after the preferential allotment.

The preferential issue would constitute 16.60 per cent of the post-issue share capital.

The fresh capital will meet the Bank's requirement for the next 15 months with special focus on SME and retail lending.

Stating that the Bank would look for tier-II headroom, Mr Vir said it would open eight new branches including Rajasthan, Gujarat and outskirts of Bangalore. ''We have applied to the RBI to open seven more branches and by 2009 we plan to have 115-120 branches across the country from the present 72,'' Mr Vir added.

The Bank's net interest margin (NIM) for FY07 is at 2.7 per cent but Mr Vir expects it to fall to 2.3 per cent in the Q1 results because of difference between lending and deposit rate.

''We however, expect it to be around three per cent for this financial year,'' Mr Vir said.

Mr Vir was of the opinion that RBI would not hike the interest rates since it would have an adverse impact on the growth of the economy. He said the bank's focus will be on retail and corporate sector advances.

UNI