The union cabinet has approved the restructuring of the paid-up capital of public sector United Bank of India through channeling part of paid-up equity capital to a reserve and injection of innovative Tier 1 capital.

Modifying its earlier approval of 18 April 2006, the union cabinet today approved a reduction of the paid-up equity capital of United Bank of India to Rs266.43 crore to boost it lending capacity, home minister P Chidambaram said after a cabinet meeting.

The government will take a return of excess paid-up capital of Rs1,266 crore and simultaneously will infuse this amount in the 'Capital Reserves' of the Bank.

Additionally, the government will subscribe a sum of around Rs800 crore in innovative Tier I capital instruments of UBI, in two tranches of around Rs250 crore in 2008-09 and around Rs550 crore in 2009-10.

The restructuring of the paid-up capital would improve key financial indicators of the Bank and additional capital funds would enable the bank extend more credit to the productive sectors of the economy, a government release said.

Earlier, in 2006, the cabinet allowed United Bank to write off its accumulated losses of Rs278.44 crore against the capital of Rs1,810.87 crore.

United Bank of India, one of the 14 major banks which were nationalised in 1969, was formed in 1950 by the amalgamation of four banks, viz, Comilla Banking Corporation Ltd, Bengal Central Bank Ltd, Comilla Union Bank Ltd and Hooghly Bank Ltd.

As against 174 branches, Rs147 crore of deposits and Rs112 crore of advances at the time of nationalisation in July 1969, the Bank today has 1,450 branches, over Rs37,167 crore of deposits and over Rs22,641 crore of gross advances.

UBI has also sponsored 4 Regional Rural Banks (RRB) one each in West Bengal, Assam, Manipur and Tripura. These four RRBs together have over 1,000 branches. United Bank of India has contributed 35 per cent of the share capital/ additional capital to all the four RRBs in four different states.