UCO Bank decides to raise Rs 200 cr

Funds needed to comply with capital adequacy norms

UCO Bank has decided to raise Rs 200 crore of Tier-II capital soon to shore up its capital adequacy ratio.

The bank will also shortlist a consultant from five who have been making presentations, shortly for purposes of restructuring in order to meet its business targets for the current year.

The five shortlisted consultants were Ernst & Young, McKinsey, Boston Consultancy Group, IBM Consultancy and National Institute of Bank Management (NIBM).

"The consultancy majors are in the process of making presentations after which one will be selected," said V Sridar chairman UCO Bank on the sidelines of a Ficci seminar on banking here today.

Sridar also said that the appointed consultant would advise the bank on how to revamp the organisational structure and the outlook of the industry in the next three to four years.

"The consultants would provide the standing of the bank vis-à-vis the industry and provide operational and management advise on the bank," he explained.

Asked about capital requirement of the bank, Sridar said there was a need to infuse both Tier I and Tier II capital to meet the Basell II norms of 12 per cent capital adequacy ratio (CAR).

At present, the bank's CAR stood at 11.25 per cent. Sridar said the bank may not go for a public offer for raising Tier I capital.

Sridar also said that the bank would definitely need Rs 200 crore as Tier II capital. Talking about Tier I capital, he said the bank was awaiting the decision of the Reserve Bank of India regarding classification of instruments which would qualify for this.

The chairman informed that the apex bank was likely to come out with definition of new instruments which would be considered as Tier I capital, helping banks to raise capital without diluting shareholding of government which in no case was to decline below 51 per cent."Following guidelines from RBI we will take a decision," he said.

In the first quarter of the current financial year, disbursement at UCO was Rs 1,100 crore, while deposits' growth was largely stagnant.The bank has targeted a business of Rs 1 lakh crore in the current year.