Union Bank of India looks to move to a new tax regime in FY23

Union Bank of India is looking to move to a new tax regime in the next financial year. It will use Rs 12,000 crore — available in the deferred tax asset (DTA) pool — to set off any tax obligations. The public sector lender plans to raise capital via Rs 1,000 crore in additional tier 1 bonds (AT1 bonds) based on market conditions. 

Rajkiran Rai G, managing director (MD) & chief executive officer (CEO), Union Bank, sa­id the net profit is increasing as DTA is coming down every quarter.

The MD & CEO said, “This time we have more cushion, so we have reversed Rs 1,500 crore of DTA in October-December 2022.” This will help improve net worth and capital adequacy. The bank may make some more reversal of DTA in March, based on the cushion available for the transaction.

The bank expects that another Rs 5,000 crore could be reversed next year as there was an exemption available (for DTA) up to 10 per cent of net worth, he said.

It will take a final decision about shifting to the new tax regime based on assessment of tax obligations and implications for balance sheet and financial parameters.

Referring to capital requirements, Rai said the bank has a sufficient capital base. It is generating profits, which will get added to capital adequacy ratio. Any additional capital raising through AT1 bonds would be dependent on market conditions and require­ments to support sustainable credit growth.    

The bank’s capital adequacy ratio stood at 13.92 per cent in December 2021, up from 12.98 per cent in December 2020.

The year-on-year growth was disrupted due to the pandemic.

But the credit growth from the end of September to December 2021 has been 5.5 per cent. That is giving the bank confidence.