Govt ready to infuse more capital in Central Bank of India: FM

NEW DELHI: Finance minister P Chidambaram said on Wednesday the
government was willing to infuse capital into Central Bank of India,
if required. He was speaking after meeting the bank's board of
directors here. The bank has a capital adequacy ratio of 10.42%.

"The government will be willing to help the bank, with additional
capital, if it requires, just as we did for SBI. It will not be a
problem for the government, if the bank can service this capital," Mr
Chidambaram said.

"The bank has not been able to utilise its resources effectively, not
able to raise its capital adequacy. Only the top line is growing, the
bottom line is not," he added.

Although the bank's CMD H A Daruwalla said while it was yet to
approach the government for capital, she would examine the bank's
capital requirement after the first quarter of this fiscal.

Ms Daruwalla said: "We have to examine our capital requirement. As a
part of compliance for accounting standard AS15, Rs 875 crore has been
provided for from the tier I capital. As a result of this, the gap for
tier II capital has reduced. The CRAR for the bank stands at 10.42%
and it's expected to be 10.78% by the end of the fiscal."

Tier II capital should be half of tier 1 capital.

There are several ways of accessing capital, including hybrid
instruments to raise tier II capital, subordinated debt. "We will
examine the least expensive way to raise capital," she said.

Last fiscal, the bank had its initial public offer, after its capital
base was restructured. The bank should also account for operational
risk in view of the implementation of the Basel II norms by March
2009.
The bank is expected to open 200 branches, which will add Rs 1,000
crore of business. By December 2010, the bank will be in the 100th
year of operation.

Over 80 branches will be opened in the next two months. The bank needs
to resolve issues related to labour and human resources, she said.

Ms Daruwalla said that the bank's cost-to-income ratio is high. The
bank has just started implementing core banking solution (CBS) across
its branches. Its cost of deposits has gone up putting pressure on the
net interest margin.