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UTI Bank seeks foreign partner

Indian private sector UTI Bank may sell up to 20 per cent stake to a foreign partner before the end of the month, a senior banking source said on Tuesday.

This will take the form of a preferential allotment of equity shares.

"A host of foreign firms like Citigroup, Fortis and Commonwealth Development Corporation are being talked to," the official who requested anonymity said.

"Nothing has been finalised but it may be announced before the annual shareholders' meet on June 30."

The official said the partner might pick up 20 per cent of the bank and help upgrade its technology to ensure speedy transactions to lower costs.

Last month UTI Bank, founded by the country's largest mutual fund Unit Trust of India, said it intended to raise capital to shore up its capital adequacy ratio.

The bank's capital adequacy ratio as on March 31 was at the prescribed level of nine per cent, but this has to be increased if it has to grow and keep pace with its peers like ICICI Bank and HDFC Bank.

HDFC Bank's capital adequacy was at 11.1 per cent while ICICI Bank's was 11.6 per cent as on March 31.

In April, UTI Bank called off a messy merger with Global Trust Bank following media allegations of share price manipulation in Global Trust shares ahead of the merger announcement in January.

Global Trust has denied the allegations.

NEW NORMS

The foreign alliance would be the first after India last month liberalised norms for foreign banks. In May, the government raised the foreign direct investment limit in India's banking sector to 49 per cent from 20 per cent.

Global banks like Citibank, HSBC and ABN AMRO Bank had expressed interest in picking up stakes in Indian banks, but regulatory curbs had curtailed their plans.

Shares of the bank have lost 36.8 per cent from its high of Rs 53.80 on January 25 while the Bombay index has dropped 19.5 per cent during the same period.

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