The government has committed to infuse an additional capital of around Rs 800-Rs1,000 crore into United Bank of India, which is facing a major crisis. This will helep the bank to comply with Basel-III norms. However, the capital infusion may be coming with a rider that the bank will make sustained efforts to recover bad loans. The government has already provided Rs 700-crore budgetary allocation for the bank this fiscal. The additional infusion will either be direct and/or through qualified institutional placement (QIP)/bonds to be picked up by institutions. The government says it is committed to infusing capital, but it should not be interpreted as encouraging practices that led to such huge NPAs. The capital will be infused only on the condition of recovery of bad loans. The government holds 87.99% stake in the bank and it cannot cross the 90% limit as, according to Sebi norms, a listed public sector company has to maintain public shareholding of at least 10%.
