Banking News

Audit on UBI says credit appraisal lax

BS Reporter | Mumbai February 12, 2014

Fitch says losses could test migration toward Basel-III

State-run United Bank of India (UBI), which more than doubled its net loss for the December quarter as compared to the previous one, will find it challenging to strengthen its equity capital to meet the Basel-III norms.

The Kolkata-based lender, on which a forensic audit had also been ordered by the Reserve Bank of India (RBI), reported a capital adequacy of 9.01 per cent under the Basel-III framework, with a Tier-I capital adequacy ratio of 5.59 per cent. The latter – which includes core and hybrid capital — is well below the regulatory requirement of 6.5 per cent, to be maintained from March 2014.

A report from Fitch Ratings said the requirement would go up to seven per cent by March 2015.

It also notes the existing holders of UBI‘s Tier-I and Tier-II capital instruments will face the prospect of automatic coupon deferral in line with RBI regulations if the total capital ratio, currently borderline at nine per cent, were to be breached. UBI was the first state-run bank in India to issue Tier-II Basel-III debt capital, through a Rs 500-crore private placement with LIC in June last year. more.......