Union bank

Union Bank of India plans to move to new tax regime in FY23

The Union Bank of India plans to move to a new tax regime in the next fiscal year. He will use Rs 12,000 crore – available in the Deferred Tax Asset (DTA) pool – to offset any tax liability. The public sector lender plans to raise capital via Rs 1,000 crore in additional Tier 1 bonds (AT1 bonds) depending on market conditions.

Rajkiran Rai G, Managing Director (MD) and Managing Director (CEO) of Union Bank, said net profit was increasing while DTA was decreasing every quarter.

The Managing Director and CEO said: “This time we have more cushion, so we reversed Rs 1,500 crore of DTA in October-December 2022.” This will help improve net worth and capital adequacy. The bank could make further cancellations of DTAs in March, depending on the cushion available for the transaction.

The bank expects another Rs 5,000 crore could be written off next year as there was an exemption available (for DTA) up to 10% of net worth, he said .

It will make a final decision on the transition to the new tax regime based on an assessment of tax liabilities and implications for balance sheet and financial metrics.

Referring to capital requirements, Rai said the bank has sufficient capital base. It generates profits, which will add to the capital adequacy ratio. Any additional fundraising through AT1 bonds would depend on market conditions and requirements to support sustainable credit growth.

The bank’s capital adequacy ratio stood at 13.92% in December 2021, compared to 12.98% in December 2020.

Year-over-year growth was disrupted due to the pandemic.

But credit growth from the end of September to December 2021 was 5.5%. This is to give confidence to the bank.

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