UCO Bank, a leading public sector bank of India, is said to be working out a follow-on public offer (FPO), in a bid to generate funds worth Rs 500-600 crore by the third quarter of 2009-10. The move will result in reducing the government’s share in the bank to 52 per cent, instead of the current 64 per cent.

The Chairman and Managing Director of the bank, S K Goel, speaking in the side lines of FICCI Banking conclave, said: "We have a headroom to raise Rs 100 crore base equity and at a premium of Rs 40-50 we can raise close to Rs 500-600 crore this year." He said that the bank is currently undergoing capital restructuring, and would soon approach the Union government for approval of the proposed FPO.

UCO bank received Rs 450 crore in March 2009 under Rs 1,200 crore tier I capital plan of the government, and is likely to receive the remaining amount of Rs 750 crore in August, through preferential allotment of shares. Earlier, in December 2008, it had completed capital restructuring, converting Rs 250 crore into perpetual non-cumulative preference shares (PNCPS), leading to a reduction in the government’s holdings in the bank from 74.98 per cent to 63.59 per cent.

The bank’s net interest margin (NIM) stood at 1.75 per cent in the quarter ended March 2009, and it is likely to remain at 2.25 per cent in the current fiscal.