State-run UCO Bank needs close to Rs 14,000 crore over the next five years to meet the new Basel-III capital norms, chairman and managing director Arun Kaul said on Tuesday. The bank has decided to cut its foreign presence and lend more to retail and SME sectors to preserve capital.
“In terms of Basel-III, we have assessed our capital requirement for the next five years to be around Rs 14,000 crore. We are looking at various options to raise funds,” Kaul said at the bank’s ninth annual shareholders’ meet here. “In addition, we are focusing on lending to retail, SME and farm sectors, where the capital to risk-weight is lower.”
The year 2011-12 saw the bank closing its representative offices in China and Malaysia. “We were not getting permission to open branches there. Hence, the opportunity was not very large while the capital adequacy requirement was extremely strict,” Kaul said.
UCO Bank closed last financial year with a capital adequacy ratio of 12.35 per cent. Of this, Tier-I ratio was 8.09 per cent. In 2010-11, the Kolkata-based lender’s capital adequacy ratio was 13.80 per cent.
According to Basel-III norms, Indian banks need to maintain a minimum capital adequacy ratio of nine per cent in addition to a capital conservation buffer, which will be in the form of common equity at 2.5 per cent of the risk-weighted assets.
In other words, banks’ minimum capital adequacy ratio must be 11.5 per cent, according to Basel-III norms. Indian banks are currently required to have a capital adequacy ratio of at least nine per cent.
The Reserve Bank of India has also said that the common equity in Tier-I capital must be 5.5 per cent of risk-weighted assets and the minimum Tier-I capital adequacy ratio must be seven per cent instead of six per cent. The new rules will come into effect from January 2013, and banks will have to implement them by March 2018.
For 2012-13, UCO Bank aims to have more than Rs 3 lakh-crore of business and a network of 2,500 branches. The bank’s total business was Rs 2.72 lakh-crore, while it had 2,390 branches in India as on March-end.
