Financial Daily from THE HINDU group of publications
Friday, Feb 03, 2006
Financial Daily from THE HINDU group of publications Friday, Feb 03, 2006 |
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Public Offer Money & Banking - Interest Rates Union Bank not to hike rates for now, says CMD — Follow-on public issue to open on Feb 15 Our Bureau
Mr K. Cherian Varghese (right), CMD, Union Bank of India, and Mr K. Rathnakar Hegde, ED, at a press conference in Mumbai on Thursday. - - Paul Noronha
Mumbai , Feb. 2 UNION Bank of India is in no hurry to increase interest rates, said Mr Cherian Varghese, Chairman and Managing Director. "We will watch the liquidity in the market and what others are doing. Interest rates depend on competition and liquidity," he said. Speaking to newspersons to announce the bank's public issue, the Chairman said short-term rates are already getting re-priced. "Corporates cannot borrow at throwaway prices anymore," he added. Union Bank's second public issue of 4.5 crore equity shares will open on February 15 and close on February 21. The bank is raising funds to augment its capital base to meet Basel-II norms and the growing credit portfolio. Up to 45 lakh shares would be reserved for employees. Of the net issue to public, 50 per cent is reserved for allotment to mutual funds. Further, 15 per cent of the net issue to public is reserved for allotment on a proportionate basis to non-institutional investors the and balance 35 per cent is reserved for allotment to retail investors on an proportionate basis. The issue will constitute 8.91 per cent of the total post issue paid-up equity capital of the bank. Post-issue, the Government holding in the bank would come down to 55.43 per cent from 60.85 per cent. "We have used only part of the headroom available for raising capital because we were waiting for RBI's guidelines on hybrid instruments for raising capital," Mr Varghese said. As these guidelines will be helpful to public sector banks, many public sector banks may now re-think their plans of raising capital through the equity market, he said. The bank's deposits have grown by 26.25 per cent and advances by 35.25 per cent as on December 31, 2005. The growth strategies include focusing on home loans and retail trade in the retail segment, on SMEs in the corporate segment and on agriculture income, said Mr Varghese. Over 60 per cent of Union Bank's branches are in rural and semi-urban areas. The lead managers to the issue are SBI Capital Markets, Citigroup Global Markets, DSP Merrill Lynch Ltd, Enam Financial Consultants and Kotak Mahindra Capital.
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