The bankâs profit fell about 42 per cent on account of higher bad debts.
State-owned UCO Bank has scrapped plans to foray into the general insurance space in view of high capital requirement, according to an official of the bank.
The public sector lender was planning to start the venture in partnership with an insurance company and two other nationalised banks. S K Goel, former chairman and managing director of UCO Bank, had earlier said the bank planned to have a 30 per cent stake in the venture, while the insurance company was expected to have a 26 per cent stake. UCO Bank was expected to invest about Rs 45 crore in promoting the proposed company.
"The regulatory capital requirement for general insurance was huge, so we did not initiate any further talks. We had also thought of engaging a consultant to rope in a partner, but did not proceed further," said the official.
The competition in the general insurance sector has been intensifying, with many companies going for a restructuring for a facelift. Also, several public sector banks like State Bank of India (SBI), Allahabad Bank and Union Bank of India already have already ventured into the general insurance sector.
The recent entry of SBI into the general insurance sector is likely to ruffle the existing players. SBI General Insurance Company Ltd is a joint venture between SBI and Insurance Australia Group (IAG). SBI owns 74 per cent and the rest is owned by IAG.
UCO Bank had earlier also shelved plans to launch a financial services subsidiary due to adverse market conditions on the Reserve Bank of Indiaâs advice.
Following the infusion of Rs 673 crore from the government, the Kolkata-based lender also put its follow-on-public (FPO) plans on hold. The government had approved its plans to raise capital through FPO. The bank had planned to issue about 60 million equity shares to raise about Rs 400 crore.
Meanwhile, UCO Bank is grappling with high non-performing assets, as in the second quarter, the bankâs profit plunged by about 42 per cent on account of higher bad debts. The public sector bank reported fresh slippages of Rs 678 crore in the quarter, against Rs 273 crore in the quarter ended September 2009, a rise of about 148 per cent.