Kolkata: UCO Bank has decided to enter into a joint venture agreement with the US-based Liberty to foray into non-life insurance business during the current financial year.
“After deciding to enter the non-life insurance business, the bank was in talks with several foreign players like the Liberty of US, Engine of Italy and a few other Japanese firms for roping in a foreign partner as per IRDA regulations,” a bank official told PTI.
While UCO would have a minimum stake of 30% in the JV, there would be another nationalised bank as a partner in the joint venture. The foreign company would hold 26% as per regulatory norms.
The official, however, declined to divulge the name of the nationalised bank.
“UCO would take a period at least three months to ink an agreement among the three partners. Then a subsidiary firm would be formed,” the official added.
The bank would raise Rs325 crore in the form of perpetual preference cumulative shares during the last week of June.
Although the bank has obtained the Finance Ministry’s nod to restructure its capital, it was yet to get the approval of the Cabinet. ”The Cabinet approval is expected any moment,” the official said.
On getting the Cabinet nod and depending upon the capital market conditions, UCO would go for a follow-on public issue to raise Rs450-500 crore from the market. “We expect the market to improve by September,” the official said.
Post follow-on offer, government holding in the bank would come down to 54%. It had approached the government for restructuring of its capital base in order to reduce the Rs800 crore equity base with a view to enhance EPS.
On the bank’s earlier plans of entering the derivatives market, the official said seeing the experience of other banks, it was not advisable to venture into this area.
At the end of March 2008, Capital Adequacy Ratio (CAR) of the bank stood at 10.09%.