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Business News/ Industry / United Bank of India may get capital injection from govt
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United Bank of India may get capital injection from govt

Rajiv Takru says the govt may consider investments to improve the capital adequacy of United Bank

United Bank of India reported a loss of Rs1,240 crore in the three months to 31 December, and its capital-adequacy ratio fell to 9.01%. Photo: MintPremium
United Bank of India reported a loss of Rs1,240 crore in the three months to 31 December, and its capital-adequacy ratio fell to 9.01%. Photo: Mint

New Delhi/Mumbai: United Bank of India Ltd., the lender with the highest percentage of bad loans in the country, may receive a government capital injection to boost its risk buffers, banking secretary Rajiv Takru said.

“We may consider investments to improve the capital adequacy," Takru said in a phone interview in New Delhi on Wednesday. “The Reserve Bank of India (RBI) is looking for the reasons behind the sudden surge in non-performing loans. The priority will be to recover" those, he said.

He didn’t specify the size or timing of a possible investment. United Bank chairman Archana Bhargava did not return two calls to her office phone by Bloomberg News on Wednesday.

Widening losses at state-run United Bank increase risks for its investors, Fitch Ratings Ltd. said in a 11 February note. Holders of United Bank’s Basel II-compliant tier 1 and upper tier 2 bonds may face an “automatic coupon deferral" under RBI regulations if the lender’s total capital ratio falls below 9%, Fitch said.

The bank reported a loss of Rs1,240 crore ($200 million) in the three months to 31 December, and its capital-adequacy ratio fell to 9.01%, the company said on 7 February. Soured debt at the Kolkata-based lender jumped to 10.8% at the end of December. That level is the highest among banks in India, according to data compiled by Bloomberg.

United Bank shares have fallen 60% over the past year, compared with the 16% decline in the S&P BSE Bankex Index, a gauge of 12 banking stocks.

In October, India announced plans to inject as much as Rs14,000 crore into 20 government-controlled lenders to guard against soured loans in a slowing economy. The government put as much as Rs700 crore into United Bank in December, the lender said in an exchange filing on 26 December.

The government owns 88% of United Bank, according to data compiled by Bloomberg. Bloomberg

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Published: 12 Feb 2014, 07:37 PM IST
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