BackUnion Bank of India eyes ₹1,000 cr capital infusion
Union Bank of India eyes ₹1,000 cr capital infusion
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Mumbai: State-run Union Bank of India is expecting a capital infusion of ₹ 1,000 crore from the government, a top company official said.
“At this moment there is no funding plan. What we have raised through MTN (medium term note) is for deployment overseas, not here. For domestic purpose, we have approached the government for some capital. Let’s see how much we get. Our need is about ₹ 950-1,000 crore (for this fiscal)," Union Bank of India chairman and managing director D Sarkar told PTI here.
An MTN is a debt note used by banks to raise capital from overseas market, which matures (paid back) in 5-10 years. They can be issued on fixed or floating coupon basis. The capital infusion from government shores up equity base of the bank to enhance lending to productive sectors. Capital adequacy is a challenge, especially with the Basel III norms coming in place, Sarkar added.
The public sector banks, which control nearly 70% of the domestic banking space, will collectively need equity up to ₹ 1.5 lakh crore, while the private sector will require up to ₹ 25,000 crore in common equity capital. On the non-equity capital front, state-run banks will require ₹ 2.65-2.75 lakh crore while private lenders will need ₹ 50,000-60,000 crore.
“We are expecting about 18-20% growth in the banking business," Sarkar said, adding that the credit offtake is low at present and a good rainfall could compensate it. The bank expects its current account savings account (CASA) deposits to grow to 32%. “We are trying to maintain CASA between 32 to 35 (%)...at 32% at this moment," he said adding they will try to meet its net interest margin target this fiscal.
“We will try to maintain interest margin above 3%, not below that," he said. On doing away with cash reserve ratio, he said, “I have no views on it. Let this debate go on. If we get some interest or it is reduced it’s fine, we can reduce our cost." The bank had recently slashed its home loans to 10.5% and vehicle loans to 10.95% and Sarkar said the exact result will be known after the quarter. “Impact has started. When the quarter ends then we can assess on how much impact it has on my profit and business," he said.
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