Nod for Uco Bank capital rejig soon

Kolkata-based UCO Bank is expecting a response from the Union government on its capital restructuring plan by the end of this month.

"I held discussion with the Union finance ministry officials last week and hope to get a response within next 15-20 days", S K Goel, chairman and managing director (CMD) of UCO Bank said today.

The chairman said the capital restructuring plan would be placed before the Union Cabinet for approval. "By November-end, we hope to get a response," he added.

Besides, the bank may go for a follow-on public offer in the last quarter of the current financial year. "If every thing goes right, we will go for the follow-on public offer in February 2008," he said. The bank has a strong equity base of Rs 799.36 crore and wants to shed Rs 300 crore.

Meanwhile, the Union government has agreed to convert equity share of Rs 300 crore into preferential shares. This will reduce the equity base of the bank to Rs 499 crore. After that the bank plans to raise Rs 100 crore through the follow-on public offer if the situation is favourable, Goel added.

The bank had submitted a blueprint for its medium-term business growth and capital mobilisation needs few months back. In its medium-term roadmap, it had requested the government to consider conversion of Rs 300 crore of its equity capital into perpetual non-cumulative preference shares.

While targeting to achieve a growth of about 20 per cent in lending for the next three to five years, the bank had proposed to pay an annual interest of 7.5 per cent on the preference share capital.

Stating that UCO Bank is focusing on mobilising low-cost deposits through current account and saving accounts (CASA), the UCO Bank chief said, the bank seeks the make credits available at a lower rate of interest. However, this will not be possible unless the cost of deposit is reduced. Similarly, the bank has initiated measures for bringing down the level of non-performing assets (NPAs).

Two officers of the rank of General Manger have been entrusted with the task of recovery. The bank has been able to make sizable recovery of bad loans worth Rs 326 crore during the first half of the current fiscal and referred 44 large default accounts to asset reconstruction companies (ARCs).

Similarly, the bank is implementing a compromised settlement scheme where the borrowers are called upon to avail of the one-time settlement.

They are offered incentives to regularise their accounts. For small borrowers also, the bank has delegated the power to the branches to allow the borrowers up to Rs.50,000 to close their accounts by paying 75 percent of the outstanding, he said.

Goel said, the process of migrating to the Core Banking Solutions (CBS) is going on in full swing and will be completed by March 2009.

While 400 branches have already migrated to the new platform, about 600 branches will be CBS compliant by March 2008. Originally, the bank targeted to make 500 branches CBS compliant during the current fiscal.