Public sector lender Allahabad Bank has decided to raise tier II capital amounting to Rs 2600 crore in the fourth quarter of this fiscal in order to meet the rising demand for funds. Rising credit demand has been contributing to the need of funds by the lender.

"I have a head room to mobilise Rs 2,600 crore capital this fiscal, and we will raise this in this quarter. It will be in the form of tier 2 capital," bank Chairman J P Dua said.

Tier II capital comprises of secondary capital of the bank like undisclosed reserves, general loss reserves, subordinated term debt etc.

Dua said that credit growth is far ahead of deposit growth although the latter has also seen a revival as compared to the recent past. The bank has also sought for capital infusion of Rs 1000 crore from the government as perpetual capital.

He said that despite rise in deposit rates, the bank expects to maintain net interest margin at 3% for Q3.