Union Bank has raised Rs 1,500 crore by issuing Basel III compliant bonds to investors. The bank has allocated additional Tier I unsecured, subordinated, non-convertible, taxable, perpetual and fully paid Basel III compliant bonds in the form of debentures, totaling Rs 1,500 crore.
The bonds are eligible for inclusion in the bank’s Tier I capital. To comply with Basel-III capital regulations, banks around the world need to improve and strengthen their capital planning processes.
These standards are being implemented to mitigate concerns about potential strains on asset quality and the consequent impact on banks’ performance and profitability. Tier I capital is the base capital of a bank’s reserves and it is mainly used to fund business activities. Banks are required to hold certain levels of Tier 1 and Tier 2 capital in the form of reserves in order to be able to absorb large losses without threatening their stability.
Shares of Union Bank of India closed at Rs 41 apiece on the BSE, up 1.99% from the previous close.