Financial Daily from THE HINDU group of publications
Thursday, Sep 19, 2002
Money & Banking
Markets - IPOs
UCO Bank to go for IPO next fiscal
Mr V. P. Shetty
KOLKATA, Sept. 18
UCO Bank will go public in 2003-04 fiscal, says Mr V. P. Shetty, the Chairman and Managing Director of the bank. This should be possible because, as Mr Shetty explained to Business Line, the Union Government has allowed the bank to set off its accumulated loss of Rs 1,665 crore against the equity. With this the equity size of the bank gets reduced to Rs 600 crore. "We have just received the Government's clearance to our request for having the loss written off,'' he said.
It might be recalled that the issue of the writing off the UCO's accumulated loss has been hanging fire for a long time.
"With a major hurdle having been overcome, it will now be imperative on our part to go public to maintain the stipulated capital adequacy ratio,'' he observed, adding that by 2004, the ratio should be at least 10 per cent.
UCO, according to its CMD, has also sought the permission of RBI and the Finance Ministry to go for Tier II capital of Rs 100 crore shortly with the greenshoe option for another Rs 100 crore.
"We hope to get the permission shortly,'' he said.
He conceded that the sharp fall in interest rates in the past couple of years had been a matter of concern to almost all banks, including UCO.
The bulk of the bank's total deposits, as much as 60 per cent, being in the form of term deposits with long maturity periods, attracts a high rate of interest. This is pushing up the bank's average cost of fund.
The bank therefore has given the option to its VRS optees to withdraw their VRS amount in the bank. It might be noted that 50 per cent of the VRS amount of the optees is locked in the bank in the form of term deposits. The total size of this amount will be about Rs 175 crore.
Despite all this and other problems, UCO is confident of posting a reasonable growth in profits in the current year, says the CMD exuding confidence. "The size of balance sheet should not matter as long as the bank has sufficient liquidity for proper deployment in various assets and investments with sufficient spread," he observed.
The bank had already cleared its wage-arrear dues. It will shortly give the option to its 24,000 employees to avail themselves of the cash credit facility.
Instead of extending loans under multiple heads involving huge paper work, it should be much preferable to both the bank and the employees to have cash credit facility extended to the employees, as under the facility, the staff will take loan only when they will need it. The bank would not insist on collaterals because that would not be necessary.
"In case of default, the bank will have no problem in recovering the amount,'' he said, pointing out,'' after all the service benefits of the employees will be with the bank''.
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