The United Bank of India on Thursday increased its base rate, or the minimum lending rate, by 25 basis points (bps) to 10.50% and decreased its deposit rate by 25 bps to 8.50% on all deposits of one year and above, the bank said in a filing with the BSE.
The bank?s gross non-performing assets ballooned to a whopping Rs 8,545.50 crore in the third quarter, about 10% of its gross advances.
As a consequence, it had to make provisions for its bad loans which ate into its capital reserves. United Bank of India?s Tier-1 capital-adequacy ratio (CAR) stood at 5.59% and its total CAR stood at 9.01% at the end of Q3. According to the Basel-III norms, a bank must have a minimum Tier-1 CAR of 7% and a total CAR of 9%.
Separately, ratings agency Icra downgraded the bank?s Tier-II bond programme. Icra said the ratings have been put on watch with negative implications. ?The revision in rating reflects considerably higher than expected deterioration in asset quality, the resultant pressure on earnings, on capital adequacy and on the solvency (net NPA as % of net worth increasing to 162% in December 13 as against 109% in Sep-13) of UBI,? the agency explained its rationale in a statement.
Icra also said lack of support from the government could trigger a further downgrade at the bank.
