Goel: Cash chase

New Delhi, July 8 (PTI) State-run Uco Bank today said it would increase both lending and short-term deposit rates by up to 50 basis points in the next few days.

“Short-term deposit rates for up to six months will go up by 50 basis points,” Uco Bank chairman and managing director S. K. Goel said.

The decision about the rate hike is likely to be taken next week. The minimum interest rate will go up to 4 per cent from 3.5 per cent and the maximum fixed deposit rate will be 7 per cent, he said.

Besides, there will be a slight adjustment in the non-priority sector lending rates Goel said.

These will include housing loans of above Rs 30 lakh and corporate loans, he said, adding these are the segment where the bank has discretion to tinker with the rates. These are not linked to the prime lending rate (PLR). There is no plan to change PLR , he added.

The bank is also planning to raise about Rs 825 crore from the market to fund its growth plans.

“We are looking to raise Rs 325 crore through perpetual non-convertible preference shares during the second quarter and about Rs 500 crore from a follow-on public offer in the third quarter of this fiscal,” Goel said.

“Hopefully, by the third quarter the market should stabilise and that would provide us opportunity to raise capital from the primary market,” he said.

The capital raised will help the bank to record 25 per cent loan growth for the next two years, he said.

On the bottomline target for the current fiscal, Goel said the bank expected to earn a profit of Rs 750 crore this fiscal against Rs 412 crore in the previous year.

“Despite uncertainties and high interest rates we expect to achieve a profit target as things are expected to look up after the end of the second quarter,” he said.

To achieve the profit target, he said the bank planned to increase its current account and savings account ratio to 35 per cent against 27 per cent at the end of March 2008. This will bring down the cost of deposits by one per cent.

The bank also plans to recover about Rs 1,050 crore from bad accounts, he said, adding, of this, Rs 150 crore will directly add to the profit.

Treasury loss

On treasury loss because of uncertain market conditions, Goel said the bank would have to make a provisioning of about Rs 130 crore.

Treasury income has come under pressure because of uncertain market conditions, depreciation in equity and government bonds, he said.

Goel said according to the capital restructuring plan, the share capital of the bank would come down to Rs 500 crore from Rs 800 crore. Government equity worth Rs 300 crore will be converted into preference shares which will help increase the earnings per share.