Public sector lender Andhra Bank on Friday said that it is looking to raise Rs 800 crore from the government to improve it?s Tier-I capital-adequacy ratio (CAR).
?Currently, our Tier-1 CAR is a little below 8% and we would need additional capital for lending for the next financial year,? said CVR Rajendran, CMD, Andhra Bank. Andhra Bank reported a net profit drop of 82.1% year-on-year to Rs 46 crore in the third quarter due to higher provisioning for NPAs. The bank?s total CAR at the end of Q3 stood at 11.04% and its Tier-1 CAR stood at 7.96%.
Analysts say banks that have a Tier-1 CAR of less than 8% will have some capital issues and will not be able to meet their projected loan book growth forecasts. ?Due to rising NPAs, banks? net worth is being eroded and Andhra Bank?s net NPAs as a percentage of net worth is 43.1%. Generally, for public sector banks, it is around 28%,? said Pradeep Agrawal, analyst at Emkay Global Financial Services.