The top management of the specified undertaking of the Unit Trust of India (UTI-I) is not in favour of UTI Bank going in for an overseas equity issue till such a time there is clarity on the future of UTI-I itself. | |
| The bank, however, is in dire need of Rs 200 crore fresh capital to sustain itself. UTI-I holds a 33 per cent stake in the private sector bank. |
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| But UTI-I's future itself is fraught with uncertainty, as the government is reportedly working on options to wind up the entity. |
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| The question now is whether to do it in one stroke or wait till all the outstanding schemes are redeemed by 2006-09. |
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| Top UTI-I sources said the considered view of the top management is to advise UTI Bank to wait till the outlines are clear. |
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| "If and when UTI-I is closed down, UTI-I's 33 per cent holding in UTI Bank will have to be placed with a third entity. It is only fair that the new owner takes a decision on the how to support the bank in its expansion," they added. |
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| UTI Bank today however, is in dire need for funds. In December 2004, UTI Bank's capital adequacy ratio (CAR) eroded to 9.5 per cent, from 10.67 per cent in September 2004. This is on the back of the bank experiencing a growth rate of 40 per cent. |
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| "We need capital immediately to sustain our growth rate. If there is no fresh induction of capital by March this year, our CAR ratio will fall below the Reserve Bank of India's stipulation 9 per cent," said senior UTI Bank officials. |
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| For a bank to declare dividends without seeking regulatory approval, the capital adequacy ratio has to be above 11 per cent, according to the latest central bank norms. |
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| P J Nayak, chairman and managing director UTI Bank had earlier told Business Standard that should fresh capital not be inducted in the current quarter, "we would need to downsize our asset base." |
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