The government announced capital restructuring of Kolkata-based UCO Bank by converting Rs 250 crore equity into preference shares that will enable the PSU lender to raise funds from the market.
"The reduction in the pure equity capital will improve the EPS and other financial so that the bank will have more attractive capital structure," Finance Minister P Chidambaram told reporters while briefing on Cabinet decisions taken on Thursday night.
If and when it approaches capital market it will have attractive capital structure and it can raise Tier I capital, he said.
This conversion of equity into perpetual non-cumulative preference shares is in accordance with RBI circular of 29th October, 2007, he said.
UCO Bank has equity capital of Rs 799.36 crore, the highest among all the listed public sector banks.
Chidambaram said, this high equity base suppresses Earning Per Share (EPS). Besides, it is difficult to service high portion of equity.
The bank, he said, had submitted a proposal for structuring government equity by converting a portion of the equity capital held by the government into perpetual non-cumulative preference shares. Perpetual non-cumulative preference shares are also part of Tier I capital, he said.
Asked about interest that would be paid on the preference shares, Chidambaram said, coupon rate would be benchmarked to the repo rate plus 100 basis points.
This would be re-adjusted annually based on prevailing repo rate on the relevant date.
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