Union Bank raises Rs 2,000 cr to shore up capital

Union Bank of India raised Rs 2,000 crore through issuing bonds that are compliant with the global banking norms, Basel-III.

“Union Bank has raised additional capital to the extent of Rs 2,000 crore by issuing Basel-III compliant unsecured redeemable non-convertible Tier-II bonds,” the state-owned bank said in a statement. The paper has a tenor of 10 years and carries a fixed coupon of 9.80 per cent per annum payable annually, it added.

The bonds are rated AAA/stable by credit rating agency CRISIL, the bank statement added. The bank’s total capital adequacy ratio was at 9.72 per cent as of the July-September quarter as per the Basel-III norms, with the core Tier-I (equity) capital at 7.11 per cent.

To help its core Tier-I capital, the government had allocated Rs 500 crore capital infusion to UBI as part of the Rs 14,000-crore capital infusion programme for state-run banks in the current fiscal, 2013-14.

A slew of lenders including State Bank of India (SBI) and IDBI Bank are mulling to hit the market with qualified institutional placement issues. SBI has also firmed up plans to raise up to Rs 5,000 crore via Tier-II bonds during the remainder of the financial year, till March 31, 2014.

The Union Bank scrip was trading at Rs 119.05, down 1.73 per cent, on the BSE in the afternoon, with the benchmark Sensex which was down 40 points.