Special Correspondent

Paid-up capital to be reduced by 80%

NEW DELHI: The Union Cabinet on Monday approved a fresh restructuring of United Bank of India (UBI) by way of reduction in the paid-up equity capital of the bank by over 80 per cent to improve its financial indicators.

Briefing the media after the Cabinet meeting, Home Minister P. Chidambaram said that while the paid-up equity [capital] would stand reduced to Rs. 266.43 crore, the Government would infuse Rs. 800 crore to enable the bank to provide more capital to productive sectors.

In 2006, the Cabinet had permitted the bank to write off its accumulated losses totalling Rs. 278.44 crore against the capital of Rs. 1,810.87 crore. According to the latest decision of the Cabinet, the Government will take back the excess paid-up capital of Rs. 1,266 crore and simultaneously inject this amount into the bank’s capital reserves. Besides, the Government will additionally subscribe Rs. 800 crore to the innovative Tier-I capital instruments of the bank in two tranches.

Giving the rationale for the Cabinet decision, an official statement said: “The restructuring of the paid-up capital [of UBI] would improve key financial indicators of the bank and additional capital funds would enable the bank [to] extend more credit to the productive sectors of the economy.”