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UTI Bank may decide on ADS on Jan 17
Anita Bhoir in Mumbai | January 17, 2005 09:45 IST
UTI Bank is expected to discuss its overseas capital raising plan at its board meeting on Monday.
The bank has already made a presentation on its proposed American depository shares/global depository receipts to promoter UTI-I, but has not yet heard from it.
In case UTI-I does not approve the overseas issue, the bank may look at a preferential issue to boost its capital adequacy ratio, which is likely to dip below the stipulated 9 per cent by end of the financial year as its assets have been growing fast.
Though the meeting has been called to consider the bank's unaudited quarterly results, the capital raising plan is likely to figure in the discussions.
The induction of three additional board members will also be taken up at the meeting.
By the end of third quarter (October-December), the bank's CAR was pegged at 9.5 per cent. While the bank is keen to raise funds overseas, the government is understood to be not keen on this.
An interim solution being mulled by UTI-I is a preferential issue. Top UTI-I sources said the considered view of the top management is to advise the bank to wait till the future of UTI-I itself is clear.
"If and when UTI-I is closed down, UTI-I's 33 per cent holding in UTI Bank will be sold. It is only fair that the new owner takes a decision on the how to support the bank in its expansion," they added.
UTI-I may call upon the other two sponsors — the Life Insurance Corporation of India and the General Insurance Corporation of India — to tide over the bank's immediate requirement of funds through a preferential issue, institutional sources said.
Bank officials said that it might raise Rs 200 crore (Rs 2 billion) through this route for the time being.
The bank has put forth its case on raising capital of around $200 million through an ADR before UTI I, said a senior bank official. "We are awaiting a response from UTI I," he added.
A senior UTI Bank official said, "We need capital immediately to sustain our growth rate. If there is no fresh induction of capital by March this year, our CAR ratio will fall below the Reserve Bank of India's stipulated 9 per cent," said senior UTI Bank officials.
For a bank to declare dividends without seeking regulatory approval, the CAR has to be above 11 per cent, according to the latest central bank norms.
P J Nayak, chairman and managing director of UTI Bank, had earlier told Business Standard that should fresh capital not be inducted in the current quarter, "we would need to downsize our asset base." The bank's asset base stood at Rs 24,150 crore (Rs 241.50 billion) as on March 2004.