The Hindu Business Line : `Union Bank 2nd public offer before March'

, WITH several banks recording over 30 per cent growth in credit as against less than 20 per cent growth in deposits, there could be a temporary asset-liability mismatch in the banking industry.

But as most banks have parked substantial amounts in statutory liquidity reserves, much above mandated levels, the liquidity crunch could at best be a transitory phenomenon, Mr K. Cherian Varghese, Chairman and Managing Director of the Union Bank of India, said.

In order to sustain the capital adequacy level at over 12 per cent, the bank would go for its second public issue before March 2006. Although still above the RBI stipulated 9 per cent, the capital adequacy level had slipped to 10.5 per cent as on September. With the enforcement of Basel II norms, the capital adequacy norms on market, operations and credit risk are likely to become more stringent. This is expected to reduce the bank's capital adequacy by 0.6 to 0.7 per cent. "The issue is aimed at shoring up the capital adequacy ratio in view of the robust growth in credit and to meet Basel II requirements," Mr Varghese said. The issue is expected to fund the incremental growth in business.

The board has approved the issue of an additional 4.5 crore equity shares, which is expected to reduce government holding from 60.85 per cent to 55.43 per cent. The bank has received approval from BSE and NSE, and is awaiting consent for the draft Red Herring prospectus, which has been filed with the Securites and Exchange Board of India.