Union Bank may get Rs 1,000 cr capital support, says CMD Sarkar

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D. Sarkar, CMD.
D. Sarkar, CMD.

Union Bank of India expects a capital infusion of about Rs 1,000 crore from the Government in the next few weeks, D. Sarkar, Chairman and Managing Director has said.

“We have applied, and are expecting Rs 950-1,000 crore capital support,” Sarkar said.

The Government has agreed in-principle to provide this capital support, Sarkar said. Currently, the Centre has 54.35 per cent stake in Union Bank of India.

In 2011-12, the bank received capital support of Rs 280 crore. The expected capital support of Rs 1,000 crore will bolster Tier-I capital, which was 8.17 per cent as of end-September 2012.

In Budget 2012-13, the Centre had provided about Rs 15,000 crore towards recapitalisation of public sector banks.

The three banks that are likely to get capital support on a priority basis are Indian Overseas Bank, Central Bank of India and Bank of Maharashtra.

State Bank of India may also get capital support if the Government were to agree for a rights issue by the country’s largest commercial bank.

All but Dena Bank have tier-I capital of above 8 per cent.

Sarkar admitted that non-performing assets (NPAs) were on the higher side, but noted that the bank aims to bring the gross NPA level to 3 per cent by March 2013.

Gross NPA as a percentage of advances stood at 3.66 per cent as of end-September.

RBI Monetary Policy

Sarkar said he expects the RBI to effect some policy rate reduction on December 18, stating that such a move would boost economic sentiment.

As a banker, I expect repo rate to come down by about 25 basis points.

(This article was published on December 9, 2012)
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