Public sector lender United Bank of India expects to shore up its capital adequacy ratio by raising R575-crore worth capital by this quarter-end through converting perpetual non-cumulative preference shares into common equity in favour of the government and allotting equity shares to LIC on a preferential basis.
The bank said the process of raising R275 crore through conversion of perpetual non-cumulative preference shares (PNCPS) that the government holds into common equity, along with issuing equity shares to public sector LIC on preferential allotment basis in order to raise additional R300 crore is likely to complete by June-end.
Improving its capital adequacy ratio is the most important agenda for the crisis-hit bank as the Reserve Bank of India (RBI) has recently asked it to do so to be able to lend beyond R10 crore to a single borrower. The central bank has earlier barred the lender from lending more than R10 crore to any single borrower due to worsening capital adequacy situation.
“We informally discussed the issue of lifting the cap of R10 crore with RBI and it has advised us to shore up the capital adequacy ratio first,” United Bank of India executive director Sanjay Arya told FE. “Our plan to raise R575 crore by this (first) quarter-end is in that direction,” Arya said.
United Bank will seek shareholders’ approval for raising the capital at its annual general meeting on 18 June.