We might raise capital through AT-1 bonds in H2, says Rajkiran Rai G

Union Bank of India's Rajkiran Rai G, in an interview with Abhijit Lele, talks about managing the integration of banks amid lockdown, raising capital

Managing the integration of two banks — Corporation Bank and Andhra Bank — amid the nationwide lockdown poses a challenge for Union Bank of India’s management. In an interview with Abhijit Lele, Rajkiran Rai G, the managing director and chief executive officer of the bank, says though it is adequately capitalised, the bank might raise capital in the second half of financial year 2020-21 (FY21). Edited excerpts:

Will bank look for extra capital for regulatory and growth purposes?

The combined entity, following the merger of Corporation Bank and Andhra Bank, will not raise any equity capital. We could look at raising capital through additional tier-I (AT-1) bonds. This might happen in the third or fourth quarters of FY21.  

How are you going managing the integration considering the current nationwide lockdown?  

These are two different things actually. The branch network is handling basic services. They will take care of those issues (about operations and payments). Large and mid-corporate credit is centralised, the matters concerning them will be dealt by the head office. We are already receiving a lot of applications for working capital limits. The merger does not affect this. Credit-related activities will be normal from next week.   

After the YES Bank debacle, some private banks facing pressure because of deposit withdrawals have approached public sector banks for liquidity support. Have you given money, and if yes, in what form?

Some private banks and mutual funds did face liquidity issues last month (especially in the third and fourth weeks). We have helped them as these are temporary problems.

Many government departments withdrew money so they (banks) had temporary mismatch. All large public sector banks have subscribed to certificates of deposit (CDs) floated by private banks. Mutual funds also came under heavy redemption pressure. We have provided them credit lines and have also bought bonds that they were ready to sell. We have sufficient liquidity. So, naturally, one who is surplus with fund will give money to the one who needs it after conducting due-diligence.

What will organisational structure of the integrated entity be?

We already have a new organisational structure approved by the board. However, we have not moved because of the Covid-19 outbreak. We are running with an interim structure at present, where all existing branches, regional and zonal offices work normally. We are not changing anything now because at this point we have to look after credit needs of micro, small and medium enterprises.