"We have decided to raise Rs 1,000 crore from Additional Tier-I (AT-1) bonds," Bank of Baroda executive director Rajan Dhawan told PTI.
"This is to augment additional Tier-I Capital of the bank," he said.
Under the Basel-III norms, AT-1 bonds come with loss absorbency features, meaning that in case of stress, lenders can write off such investments or convert them into common equity if approved by the Reserve Bank (RBI).
AT-1 bonds, which qualify as core or equity capital, are one of the means of raising capital by public sector banks that require Rs 2.40 lakh crore by March 2019 to meet global norms on capital adequacy (Basel III).
Besides, the board has decided to fix January 23, 2015 as the record date for determining the shareholders of the bank, who are entitled to receive the equity shares of the bank upon the sub division.
As per the share split scheme, one existing equity share of face value of Rs 10 each would be split into five equity shares of face value of Rs 2 each fully paid up.
Stock splits are usually carried out to make the shares more affordable to retail shareholders, thereby widening the shareholder base, which in turn boosts the liquidity of these stocks.
Meanwhile, the bank was slapped Rs 25 lakh fine last month for violation of RBI's instructions on Know Your Customer (KYC) and anti-money laundering (AML) norms.
The fraud was noticed after it received a complaint from a reputed statutory organisation in August, 2013, which gave the details of the fraud perpetrated in five banks including BoB, "with the connivance of certain officials of the statutory organisation".
After its inquiry, the RBI found non-adherence of KYC norms such as customer identification and acceptance procedure and non-adherence to instructions on monitoring of transactions in customer accounts.
The apex bank said that it came to the conclusion that some of the violations of serious nature were substantiated and warranted imposition of monetary penalty on two banks, ICICI Bank and Bank of Baroda.