Home Minister Palaniappan Chidambaram said on Monday that capital restructuring of the state-owned United Bank of India (UBI) will soon be underway. The government-approved restructuring of capital will include over 80 percent reduction in paid-up equity, in an attempt to improve the monetary strictures of the bank.

After the decision with regard to the UBI had been taken at a cabinet meeting, Chidambaram said along with reducing the paid-up equity capital of the bank to Rs 266.43 crore, the government also intended a cash-infusion of Rs 800 crore into the bank, thereby enabling it to provide more capital to productive sectors.

Saying that the cash-infusion by the government will come in two trances until March 2010, Chidambaram told reporters that while the first trance is scheduled for March 31, the second will come around the next fiscal year in Tier-I capital instruments of the state-run bank. Chidambaram said: "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."

In the recent past, India looked up to the World Bank for help towards recapitalizing nearly 18 state-run banks by the end of March 2010, and assisting them in increasing their capital adequacy ratio to at least 12 percent.