Banks may not be in a position to go to the market now: United Bank CEO

Bank's merger with Oriental Bank of Commerce and Punjab National Bank will be smooth, says Ashok Kumar Pradhan.

United Bank of India, one of the oldest banks in eastern India, will be amalgamated with Oriental Bank of Commerce and Punjab National Bank on April 1. Ashok Kumar Pradhan, managing director and chief executive officer of the bank, spoke to Namrata Acharya and Ishita Ayan Dutt about the merger and issues like non-performing assets (NPA) of banks. Excerpts from the interview.

What is your assessment of the Budget, especially its impact on public sector banks?

As a banker, I feel, increasing the deposit insurance limit to Rs 5 lakh is a positive, but it will  largely impact operating profit of  banks. Regarding, recapitalization of banks, the government has assured that as and when required capital will be provided to the banks. It is expected that banks will raise money from the market. At the moment, given the position of the balance sheet of banks, they may not be in a position to go the market, shall look forward to credit offtake with overall feel good factor.

What is the progress of merger?

The process of merger is going smoothly. All the 34 committees have given their reports. It is being evaluated by the advisor (Meanwhile, the anchor bank has appointed one advisor). They will be in a better position to standardize/ harmonize, as they have the combined views of three banks.

Has the swap ratio been decided?

The valuation has been done, and some reconciliation process is on.

What are the broad recommendations of the committees?

All the banks draw guidelines from government of India. So the framework is same. What is needed is codification and synchronization of products’ features and processes to give clarity in the amalgamated entity.

What is the progress of IT merger?

The anchor bank is discussing with Infosys. Our GM, IT is also coordinating with that. We understand, Infosys is working for the merger of Bank of Baroda. Hopefully they have come out with some sort of solution for Bank of Baroda. If they find reasonable amount of success, then that should be carried forward, it will be easier for our merger.

What will be the cost of the merger?

Initially the cost will be mostly on IT integration. Rest will be intangible cost. The real picture will be clear after a year or so. There will be lot of savings also in terms of administrative cost. Overlap of branches in states like Punjab, Haryana, Himachal Pradesh and Delhi could be rationalised. OBC and PNB concurrently present in many pockets. It is not that we need to close the branches, but some of them can be merged and the licence which is freed can be utilized to open branches in other areas/pockets.

What is your view on the steps taken to boost credit growth in the last monetary policy?

I think, it was an excellent monetary policy. Definitively, credit growth will get a big boost.

Is agri loan a cause of concern?

Agri loan is a cause of concern. It is considered as a loan in perpetuity. Now the Regulator is suggesting that it should be liquidated and given afresh. We have suggested, a part of the loan be continued and the rest be closed/allowed again as is done now.

In the present scenario, what is the biggest concern of the banks?

Stalled projects is a major issue with the bankers. We need to find a solution to this problem. In the power industry alone more than Rs 2 trillion is stuck. Solution in power sector would unlock huge amount of funds.

How has been the credit offtake this financial year?

Credit offtake has been poor this financial year, 7-7.5 per cent for the banking sector. At UBI, we have been relatively better. In retail, our credit growth is 14 per cent. In MSME it is 7-8 per cent.