Allahabad Bank to get 670 cr from govt; stock up

KOLKATA: Allahabad Bank will receive 670 crore as fresh equity from the government before March, to raise the government holding in the bank to 58% from 55.23%.

At 10 am, shares of the company were trading 0.70% up at Rs 215.50 on the Bombay Stock Exchange.

The bank will preferentially allot 2,95,15,418 equity shares of 10 each at a premium of 217 per share to the government against the capital injection. Shareholders of the bank on Wednesday approved this at an extraordinary general meeting. Consequently, its tier-I will improve to 8.23% at the end of the fiscal.

Allahabad Bank chairman and managing director JP Dua said: "This fresh capital will help us in growing business, more particularly in extending credit to productive sectors of the economy."

Shareholders of United Bank of India (UBI) have approved the government's plan to infuse 308 crore in the bank against preferential allotment of 2.8 crore with the government.

The capital dose will provide the banks much larger headroom to raise capital through follow-on public offer.

As per the extant guidelines, government holding in public banks can't go below 51%, the norm which restricts equity-raising capacity for many banks like Allahabad Bank, Dena Bank or Union Bank of India, wherein the government holding has come close to the stipulation.

UBI, is however, much better placed in terms of government equity with a 84.20% holding, which will now improve to 85.48%. Both the banks are expected to allot the shares immediately on receipt of the fund from the government, which is expected before the close of this fiscal.