Allahabad Bank has shelved its plans to raise funds through a rights issue and perpetual debt. The bank says it has sufficient means to raise up to Rs 2,500 crore through tier I and II capital.

In June, the bank's board had approved a Rs 149 crore rights issue proposal to seek permission of the finance ministry. However the government has not yet responded to the request.

K R Kamath, Chairman and Managing Director of Allahabad Bank said: "As of now, we are not in favour of any dilution of the government's stake. Except for the State Bank of India, the government has not allowed any other bank to go for a rights issue. We will raise funds at an opportune time. If an increase in asset base is required, we have headroom to raise up to Rs 2,500 crore through tier I and II capital. This will help maintain the present level of capital adequacy ratio (CAR) for the next two years."

The Chairman feels that the bank would wait for the right time to carry out the rights issue. Executive Director of Allahabad Bank, K K Agarwal says, "This is not the right time for a rights issue, as the book value per share of the bank is close to Rs 118, while the market value is Rs 62."

Other public-sector players such as the Union Bank of India and Syndicate Bank have also decided to defer their rights issue plans.

At present, the government holds a 55.23% stake in the Kolkata-based bank, very close to the minimum 51% it is mandated to hold in public sector banks.

The former CMD of the bank, A C Mahajan said that the lender wanted to raise Rs 300 crore through perpetual debt, which falls in the tier-I category. But now the bank has ruled out any possibility of raising funds through this route.

The bank also believes its headroom - Rs 2,500 crore - is enough to maintain a capital adequacy ratio at 11% over the next two years. Kamath said: "Our CAR is at 11.68% keeping Basel II in mind." He added the bank would raise requisite capital as and when needed.

The bank is targeting a credit growth of about 20% along with a 17% growth on the deposit side in this fiscal. It also intends to maintain a net interest margin of 2.75% for the same period.

Allahabad Bank has recently signed a distribution agreement with Universal Sompo General Insurance Co. Ltd (USGICL) for selling its insurance products from November 1st.

Allahabad Bank is a stakeholder with 30% shares in Universal Sompo, a joint venture that also includes Indian Overseas Bank, Karnataka Bank, Dabur Investments and Sompo Japan Insurance.