International Finance Investment and Commerce (IFIC) Bank will issue a bond worth Tk500 crore and use the proceeds to increase the private sector lender's capital base.
The non-convertible subordinated bond is expected to help the bank fulfil its Basel III requirements.
The decision was made at its board meeting on 28 February.
The bank will set the tenure of the bond after getting approval from the Bangladesh Securities and Exchange Commission and the Bangladesh Bank.
Currently, the local bond market is dominated by subordinated bonds mainly issued by banks. These help the lenders construct their mandatory Tier 2 capital base through the bond proceeds within a specific tenure.
The Bangladesh Bank is implementing Basel III in the local banking industry so that banks have adequate capital to avert a systematic risk.
Basel III is an international regulatory accord that introduced a set of reforms designed to mitigate risk within the international banking sector by requiring banks to maintain proper leverage ratios and keep certain levels of reserve capital in hand.
The capital adequacy has two parts. The first part is equity that is perpetual in nature and regarded as Tier 1 capital base. The second tier is a capital base formed through debt securities, which is repayable at maturity but helps strengthen a bank in the interim.
Last year the securities regulator rejected the bank's right offer to raise its capital because of its inability to appoint underwriters for subscribing to the right shares.
Underwriter companies, such as merchant banks, give guarantees to buy the shares of an issuer company that intends to raise capital through a public offering. The underwriter then gets a commission against this guarantee.
However, if general investors do not buy all the shares of an issuer company, underwriters buy the remaining portion.
Meanwhile, in the first three quarters of last year, IFIC Bank posted consolidated earnings per share (EPS) of Tk0.76, which was 42% lower than that in the same time of the previous year.
The bank got listed on the Dhaka Stock Exchange (DSE) in 1986.
Its shares closed at Tk12.30 at the DSE on Monday.