UBI seeks Rs 550 cr more

State-owned United Bank of India (UBI) has sought Rs 800 crore from the government to maintain an 8 per cent Tier-I and overall 12 per cent capital adequacy ratio (CAR) by 2012, in keeping with the government’s advice to public sector banks on CAR requirements.

In March, the government had contributed Rs 250 crore as Tier-I capital to the bank by subscribing to perpetual non-cumulative preference shares (PNCPS) at repo plus 100 basis points.

The lender expects to get an additional Rs 550 crore as Tier-I capital by December. The capital adequacy ratio (CAR) of the bank will be more than 13 per cent after the capital infusion.

The bank is planning to come out with an initial public offering (IPO) by January 2010.

The UBI board has already approved an issuance of 50 million shares of Rs 10 each at a premium. Post-issue, the bank’s paid-up capital will be about Rs 316 crore. The capital restructuring reduced the bank’s paid-up capital to Rs 266 crore from Rs 1,532 crore earlier.

“We are awaiting a formal approval from the government for the IPO. We hope to file the offer document with the Securities and Exchange Board of India (Sebi) by November,” said SC Gupta, chairman and managing director, UBI.

The bank has also chalked out a post-IPO expansion plan, in order to extend its network to Bangladesh. The bank plans to open at least 128 more domestic branches in the next one year. In addition, it is also seeking to set up a housing finance subsidiary this year.

Another Kolkata-based bank, Allahabad Bank, which so far has not approached the government for capital infusion, may also seek capital to boost its Tier-I capital.

“We are working on a capital requirement plan for Tier-I capital and will look into how much funds we require from the government,” said KR Kamath, chairman and managing director, Allahabad Bank.

The World Bank recently approved loans worth $4.3 billion to India to boost infrastructure finance and strengthen the capital base of public sector banks. The approved loan includes a budgetary support of $2 billion for capital infusion into public sector banks.