Public sector lender United Bank of India on Tuesday said the Reserve Bank of India (RBI) has allowed it to lend up to R200 crore to a single AAA- rated PSU and corporate borrower.
The bank said this relaxation on the lending front followed from the improving capital-adequacy ratio under Basel-III and its plan to raise an additional R575 crore of capital shortly to shore up the capital adequacy. The central bank’s decision will allow the lender to raise its exposure to the corporate sector.
Last year, the RBI had restrained the crisis-hit lender from advancing a loan of more than R10 crore to a borrower, given the bank's worsening capital-adequacy ratio.
“…the Reserve Bank of India, vide its letter dated June 3, 2014, has allowed the bank to consider loan proposals up to R200 crore taking exposure to AAA-rated PSUs and corporate borrowers, subject to ensuring the CD ratio not beyond 70% and CRAR not below 9% as on
June 30, 2014,” United Bank said in a BSE filing.
“Earlier, the RBI had restricted us from lending beyond R10 crore to a single borrower due to our low capital adequacy. Now, with the better capital-adequacy ratio and our plan to raise additional capital from LIC and the government, the central bank thinks that we can finance the corporate sector,” Sanjay Arya, ED, United Bank of India, told FE.
“Now, we can raise the exposure to the corporate sector. We can increase our exposure to any of our existing AAA-rated customers by additional R200 crore,” he said.
The bank expects to shore up its capital adequacy ratio by raising R575-crore worth capital by this quarter end by converting perpetual non-cumulative preference shares to common equity in favour of the government and allotting equity shares to LIC on a preferential basis.
The bank said the process of raising R275 crore through conversion of perpetual non-cumulative preference shares (PNCPS) that the government holds to common equity, along with issuing equity shares to public sector LIC on a preferential allotment basis, to raise an additional R300 crore is likely to complete by June end.
The bank’s capital adequacy ratio had stood at 9.01% under Basel-III norms by the end of December quarter last fiscal, against the minimum requirement of 9%. The crucial ratio improved to 9.81% at the end of March 31, 2014.
It is targeting to maintain CRAR at 10% by FY15 end by raising