Uco, Central Bank seek additional capital from govt

Vijaya, United Bank ascertaining requirement for more funds, likely to approach finance ministry soon.

Public sector lenders Central Bank of India and Uco Bank have sought fresh injection of capital by the government to help attain a capital adequacy ratio (CAR) of 12 per cent by the end of the current financial year.

Uco Bank wants the government to subscribe to non-cumulative preference shares worth Rs 400 crore, which it plans to issue soon. “This will give us headroom to raise another Rs 400 crore in tier-II capital. After the whole exercise, our capital adequacy ratio will be around12.50 per cent,” Uco Bank Chairman and Managing Director SK Goel told Business Standard.

If the government approves the proposal, the Kolkata-headquartered bank will put its proposed follow-on public offer on hold and wait for market conditions to improve, he added.

Similarly, a senior executive at Central Bank of India said the bank has approached the government for capital support.

“We had to make a provision of Rs 875 crore to comply with the requirements of Accounting Standard (AS) 15. As a result, our CAR fell to 9.85 per cent. We have requested the government to support us with tier-II capital through hybrid instruments,” the executive added, without disclosing the extent of assistance sought.

Another Kolkata-based bank, United Bank of India (UBI) is in the process of capital restructuring and is evaluating the requirement for the next three years. “We have appointed a consultant for the job and after figuring out the total capital requirement for the next three years, we will approach the government,” said UBI Chairman and Managing Director S C Gupta.

Vijaya Bank Chairman & Managing Director Albert Tauro said the bank is in the process of ascertaining the capital requirement based on the profitability and business growth prospects. “As of September, our CAR is 10.41 per cent. We need capital, for which we will approach the government,” he added.
 

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Capital adequacy ratio
(In %)

Quarter ended

Sep-07Dec-07Mar-08Jun-08Sep-08 Allahabad Bank13.0112.8412.0411.6811.46 Bank of Maharashtra13.612.7610.2610.9710.78 Central Bank of India12.3811.6310.4210.019.85 Indian Overseas Bank13.3112.8511.9611.4111.85 UCO Bank11.511.5710.0910.5311.61 Vijaya Bank11.2812.2111.2210.4710.41

The moves come after Finance Minister P Chidambaram announced the government’s intention to inject fresh capital in public sector banks which have under 12 per cent capital adequacy ratio. Apart from Uco Bank, UBI and Central Bank, the capital adequacy ratio of Vijaya Bank, Bank of Maharashtra, Indian Overseas Bank and Allahabad Bank is below 12 per cent. The Reserve Bank of India has mandated a capital adequacy ratio of over 9 per cent and all Indian banks comply with the stipulation.

At present, the capital adequacy ratio of Uco Bank and Central Bank is 11.39 per cent and 10.42 per cent respectively. UBI’s CRAR is around 11 per cent. CRAR or capital to risk (weighted) asset ratio is a ratio of a bank’s capital to its risk, reflecting its financial health and ability remain solvent in times of liquidity crunch.