Of the Rs 6,000 crore, the Board had approved raising up to Rs 4,200 crore from the debt market if the equity markets are not favourable
The Board of Union Bank of India approved a fundraising plan of Rs 6,000 crore during this fiscal to fund its growth. Of this, the Board has approved raising up to Rs 4,900 crore from the equity market through any instrument like a qualified institutional placement (QIP), a right issue or a follow-on issue, depending on the conditions of the market. Of the Rs 6,000 crore, the Board had approved raising up to Rs 4,200 crore from the debt market if the equity markets are not favourable.
"The Board met and approved the capital raising plan today. With credit growth picking up there will be more opportunities for us to lend so we have to keep the enabling provisions ready so that the bank can hit the market," a senior bank official said.
In the last financial year in March 2019, the government had infused Rs 4,112 crore into the bank. Besides this, the lender also mopped up Rs 568.32 crore from the share sale to its employees.
Rajkiran Rai, managing director and chief executive officer, Union Bank of India, told analysts in a concall on Tuesday, "The capital adequacy ratio of the bank is above regulatory requirements. The fundraising will be for growth purposes."
The bank is also expecting Rs 300 crore from its sale of non-core assets this year. It includes the bank's investments in National Stock Exchange, National Payments Corporation of India, National Securities Depository, and Clearing Corporation of India. On the capital adequacy front, Union Bank's capital adequacy ratio under Basel III rose 32 basis points year on year to 11.78% in Q4 of FY19.
The state-owned lender expects a credit growth of 9-11% and deposit growth of 8% in the current financial year. This is much higher than the growth of 3.7% in advances and 2.7% in deposits recorded in 2018-19. The bank reported its gross non-performing assets (NPA) ratio at 14.98% at the end of March 2019, down from 15.73% a year ago. Its net NPA ratio also fell to 6.85%, down from 8.42% in the same period. Slippages in the January-March quarter included Rs 900 crore from the IL&FS account. The bank's total exposure to the troubled non-banking finance company is at Rs 1,100 crore.
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