United Bank of India seeks Rs 1000 crore bailout to meet capitalisation requirements

State-run United Bank of India, which posted a loss of Rs 489 crore in the second quarter of this fiscal and is saddled with rising bad loans, has asked the government for an additional Rs 1,000 crore to meet its capitalisation requirements.
A senior bank official confirmed that it had sought fresh capital from the government.
“The business environment is not conducive.We are not the only bank to face such trouble. The additional support from the government will help us improve our profitability in the longer run,” the official said.
The bank’s performance has forced it to seek fresh capital support, senior bank officials said. Chairman and managing director Archana Bhargava declined to comment. Gross non-performing asset (NPAs) widened to 7.52% of advances at the end of September from 3.88% a year ago. Net non-performing assets rose to 5.39% from 1.95%. The government had infused Rs 14,000 crore as capital in staterun banks in October. It had then said that a second round of capital infusion could take place in the fourth quarter depending on banks' performance in lending to consumer sectors.
“Performance is definitely a key factor but we cannot let banks fail. If they do not perform, management may be held accountable,” a finance ministry official said. United Bank is also looking at raising Rs 1,000 crore through a qualified institutional placement (QIP) but this may be shelved if its performance does not improve.
“We have been investing in the banking sector including state-run banks. But it may be difficult to participate in issues of non-performing banks as our investment committee may not approve of such investment,” said a senior official with the Life Insurance Corporation.
The government currently holds an 82.23% stake in United Bank. The stock, which touched a 52-week low of Rs 27.40 on August 30, has since recovered and closed at Rs 34.35 on Monday on the BSE. According to RBI, state-run banks will need around Rs 4.15 lakh crore to meet Basel III norms. Out of this, equity capital will be of the order of Rs 1.5 lakh crore, while non-equity capital will be Rs 2.75 lakh crore. The government has committed to keep the capital adequacy ratio (CAR) of state-run banks at 8%.