Government to re-structure paid-up capital of United Bank of India

The union cabinet has approved the restructuring of the paid-up capital of public sector United Bank of India through channeling part of paid-up equity capital to a reserve and injection of innovative Tier 1 capital.

Modifying its earlier approval of 18 April 2006, the union cabinet today approved a reduction of the paid-up equity capital of United Bank of India to Rs266.43 crore to boost it lending capacity, home minister P Chidambaram said after a cabinet meeting.

The government will take a return of excess paid-up capital of Rs1,266 crore and simultaneously will infuse this amount in the 'Capital Reserves' of the Bank.

Additionally, the government will subscribe a sum of around Rs800 crore in innovative Tier I capital instruments of UBI, in two tranches of around Rs250 crore in 2008-09 and around Rs550 crore in 2009-10.

The restructuring of the paid-up capital would improve key financial indicators of the Bank and additional capital funds would enable the bank extend more credit to the productive sectors of the economy, a government release said.

Earlier, in 2006, the cabinet allowed United Bank to write off its accumulated losses of Rs278.44 crore against the capital of Rs1,810.87 crore.