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Bank of Baroda Plans to Raise $1.8 Billion to Boost Buffers

Bank of Baroda plans to raise as much as $1.8 billion over the next 12 months to improve risk buffers and boost lending.

Bank of Baroda Plans to Raise $1.8 Billion to Boost Buffers
Pedestrians pass a Bank of Baroda bank branch. (Photographer: Chris Ratcliffe/Bloomberg)

(Bloomberg) -- Bank of Baroda, India’s third-largest state-run lender by market value, plans to raise as much as 135 billion rupees ($1.8 billion) over the next 12 months to improve risk buffers and boost lending.

The lender, which combined with two smaller rivals last year, plans to raise 90 billion rupees selling shares and the balance through debt including tier-I capital, Bank of Baroda said in exchange filings on Friday.

Bank of Baroda joins private-sector peers including Kotak Mahindra Bank Ltd. and Yes Bank Ltd. in beefing up capital buffers, as Indian lenders brace for a surge in loan defaults due to a lockdown on the economy. The Reserve Bank of India has also ordered lenders to set aside additional provisions for loan-repayments frozen during the shutdown and the government this year did not budget any cash for state-run lenders.

Kotak Mahindra Bank on Wednesday said it plans to raise about $1 billion with a new share issue in a move that will strengthen its capital buffers and reduce the stake held by its wealthy founder.

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