Page 7 - Banking Finance April 2020

BANK UPDATE

BANKING

NEWS
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NEWS
NEWS

Union Bank of India re- Bank of Maharashtra to raise up to Rs 600 crore

duces MCLR By 10 Bps through bonds
Bank of Maharashtra stated that it will raise up to Rs 600 crore through bonds
Union Bank of India (UBI) has re-
on a private placement basis. "The bank is proposing to raise capital by issue of
duced the Marginal Cost of funds-
based Lending Rates (MCLR) by 10 Basel III-compliant unsecured, redeemable non-convertible tier II bonds of base
issue of Rs 200 crore with green shoe option of Rs 400 crore aggregating to Rs
basis points (100 bps = 1 per cent) all
600 crore on private placement basis," the bank said in a regulatory filing.
over the tenors, which will be effec-
tive from March 11, 2020 till March Banks are required to improve and strengthen their capital planning processes
31, 2020. Since July, 2019 this is the in order to In order to comply with Basel-III Capital Regulations. `The Indian
ninth consecutive rate cut an- banking system has been implementing Basel III standards in phases since April
nounced by the bank. The new one- 1, 2013.
year MCLR of the bank now stands IBA holds meeting with large banks, discusses on pos-
at 8% per annum, down from 8.10%
per annum. sible credit lines, special benefits to give various sec-
Naveen Kukreja, CEO of Paisabazaar, tors
said, “UBI’s cut in the MCLR is in line In order to figure out ways to address the business hit by coronavirus outbreak,
with the prevalent falling interest re- large banks had an emergency meeting. 20 senior bankers attended the video
gime. MCLR is the minimum lending conference and discussed discussed on possible credit lines and special benefits
interest rate which banks can lend.” that could be given to transportation, travel and tourism, exports and MSMEs.
“As banks set their MCLR primarily Indian Banks’ Association called the meeting where, IBA chief executive Sunil
on the basis of their cost of funds, a Mehta said, “Banks are collating information, and IBA will then forward the
steady decline in deposit rates is re- recommendations to RBI.”
ducing their cost of funds and He added, “IBA and member banks are planning to come out with advisories to
thereby reducing MCLR. The cut will create customer awareness and promote contact-less banking. IBA will also
benefit those borrowers who have assure clients that institutions are putting in place business continuity plans, and
their interest rate reset date till the encourage banks to have flexible working hours.”
next review of the bank’s MCLR.
“Several businesses are stuck… there are so many cases where letters of credit
Other existing borrowers of UBI un-
der the MCLR regime will continue have been opened, payments made, but shipments have not arrived. Some of
the banks felt that the present circumstances may call for regulatory forbear-
to repay in the same lending rate," ance as many borrowers could find it difficult to service loans in time,” said
he said.
another banker.

BANKING FINANCE | APRIL | 2020 | 5