“UCO Bank has approached ED investments (P.K.Molri) and submitted the letter for capital infusion,” said a source on condition of anonymity.
Kolkata-based UCO Bank, has also requested LIC Insurance Corporation to approve the capital infusion before March 31, 2018. Once approved by LIC, the bank will have to take shareholder’s nod.
UCO Bank is one of the many lenders which are placing shares with LIC on preferential basis to bring down government stake and raise public holding. Banks need capital also to meet Basel III stringent capital norm.
The Insurance Regulatory and Development Authority of India (IRDAI) allows the biggest institutional investor Life Insurance Corporation (LIC) to invest up to 15 percent in public sector banks.
According to latest RBI data, capital adequacy ratio of the public sector banks as on September 30 was 12.2 percent while the CET1 (Common Equity Tier 1) ratio was 4.7 percent.
UCO Bank, for example, had a CET1 of 6.64 per cent and gross non-performing asset ratio of 19.74 per cent as on September 30.
In January, 2018, Kolkata-based bank had informed stock exchanges that the bank’s Board had approved a proposal to issue equity shares on preferential basis to the government for capital infusion of Rs 1,375 crore.
This was done as part of the release the much-required equity capital to six stressed the public sector banks as some of these lenders were on the verge of breaching minimum capital norms on December 31, 2017. Lenders were asked to improve on parameters such as bad loans and recovery.
The government had on October 24 unveiled a Rs 2.11 lakh crore two-year roadmap for strengthening NPA-hit public sector banks, which includes re-capitalisation bonds, budgetary support and equity dilution. Source : Moneycontrol