United Bank gets shareholders' nod to raise Rs 1,000 crore

Bank expects a fund infusion of about Rs 500-600 cr from govt this financial year

Don't want to miss the best from Business Standard?

United Bank of India (UBI) on Tuesday got shareholders’ approval to raise nearly Rs 1,000 crore, either by qualified institutional placement (QIP), public or rights issue.  

Speaking at the seventh annual general meeting of the company, P Srinivas, the bank’s managing director and chief executive officer, said the infusion would help the bank maintain the capital adequacy norms as spelt out by Basel-III norms. This apart, in March, the bank got a fund infusion of about Rs 480 crore last financial year. The bank further expects a fund infusion of about Rs 500-600 crore from the government this financial year, said Sanjay Arya, executive director, UBI.

As of March 31, the bank’s capital to risk weighted assets ratio (CRAR) under Basel-III was 10.08 per cent, with tier-I ratio at 9.93 per cent. Basel-III requires banks to maintain a minimum capital adequacy of nine per cent and a tier-I ratio of seven per cent.

This financial year, the bank expects about 10-12 per cent growth in credit and deposit, with retail as its focus area, while reducing its exposure to the corporate sector. The bank will focus on housing, education and vehicle loan segments. The lender is targeting business of Rs 2 lakh crore by March 2017, said Srinivas.  At the end of last financial year, the total business of the bank stood at Rs 1,87,813 crore.

“In 2016-17, the focus will be conservation and strengthening of capital position. While making advances, the bank will endeavour to avoid sectors which are capital guzzlers and concentrate on government guarantee schemes,” Srinivas while addressing the shareholders.  UBI has also undertaken a cost-reduction drive under which it is reorganising its branches. “While this year we plan to open more branches, we are also reorganising our branches. Wherever we are finding that the branches are closely located, we are closing down a few,” said Srinivas.

UBI had posted a net loss of Rs 413.04 crore for the quarter ended March 31, 2016. On account of asset quality review, the bank’s non-performing assets (NPAs) rose sharply in the last quarter. Net NPA in January-March 2016 was 9.04 per cent; it was 6.22 per cent in the previous quarter. Gross NPAs were 13.26 per cent, against 9.49 per cent in the corresponding quarter of FY15.

“The business compulsions have propelled the bank to reorient its business strategies and reshape its business mix to make it purposeful and commensurate to the size of the bank,” Srinivas said.