Major shareholders have also pumped 500 million rupees as capital for the bank.
The balance capital will be raised by way of public issues, Ajita De Zoysa, Chairman Union Bank said.
Under recent Central Bank regulations licensed commercial financial institutions must raise tier one capital to 2.5 billon rupees.
The bank's income increased 41.8 percent to one billion rupees last year.
After tax profit increased to 51.1 million from 5.6 million rupees during the same period.
In 2006, Union Bank total assets stood at 9.082 billion rupees. Total deposits increased to 7.807 billion rupees from 6.866 billion. .