By Bijou George Of DOW JONES NEWSWIRES

MUMBAI –Indian Bank has short-listed four banks to manage a planned public share sale that will raise at least 10 billion ($222 million), four people familiar with the matter said Thursday, as the state-run lender seeks to bolster its capital base.

The state-run bank has short-listed Kotak Mahindra Capital Co., SBI Capital Markets, Enam Securities Pvt. Ltd., and ICICI Securities Ltd. for the planned issue, after meeting with investment bankers through last week.

The lender said as recently as December that it plans to raise as much as 16 billion rupees through a share sale that will lead to a 10% equity dilution in the fiscal year beginning April 1. It hasn’t, however, decided the exact size of the issue, but the intent now is to raise more than 10 billion rupees, one of the people said.

Indian Bank’s capital-raising plan comes as lenders scramble to boost their shrinking capital base, even as the central bank tightened capital rules. The country’s largest lender, State Bank of India, Tuesday announced a 99% slump in profit as a result of a hike in provisioning for bad loans under the new rules, and also reported a decline in capital adequacy.

Indian Bank, with a tier-one capital adequacy ratio of 11.02% as of March 31, is relatively well placed, but will need more capital to feed the growing demand for loans in the rapidly expanding economy, say analysts. Its tier-one capital adequacy ratio a year earlier was 11.13%.

Under local rules, the minimum tier-I capital adequacy ratio required is 6%, while the overall requirement is at least 9%.

The share sale, if transacted now, would make it the third largest so far this year, after Tata Steel’s 34.77 billion rupees public share sale and Power Finance’s 46.6 billion rupees offering. The sale, however, is likely to follow Steel Authority of India’s 60 billion share sale, scheduled to kick off in June, and Oil Natural Gas Corp.’s multi-billion-dollar share sale due in July.

The bank will face volatile capital markets, as surging prices and aggressive central bank tightening have pressured financial stocks in particular, even as economic growth shows signs of a moderation. The Bombay Stock Exchange’s Bankex, an index of financial stocks, has fallen 7.7% this month, compared with a 5.3% fall for the main benchmark Sensitive Index.

Indian Bank’s shares were trading flat at 220.40 rupees on the Bombay Stock Exchange at 0700 GMT, underperforming a 0.3% gain in the benchmark.