UBI in talks with ARCs to sell Rs 100 cr worth bad loans

United Bank of India (UBI) is negotiating with a clutch of asset reconstruction companies (ARCs) to sell bad loans worth Rs 100 crore for cleaning up its loan book, a senior bank official today said.

The bank plans to sell off Rs 100 crore of its bad loans by end-March and has already sold Rs 200 crore worth bad assets so far in this fiscal, UBI Executive Director T M Bhasin told reporters at the bank's listing ceremony here.

"We have received bids from ARCs to sell our bad assets. We are currently evaluating bids and expect to sell Rs 100 crore-worth bad loans by the end of this month," he said.

The decision to sell off bad loans is part of restructuring the bank's advance portfolio and also reduce the non-performing assets (NPAs) burden, Bhasin said, without outlining the segments which have incurred most of the losses.

Kolkata-based UBI has a gross NPA level of 2.4 per cent, while its net NPAs stands at 1.21 per cent. This is slightly higher than its peers.

United Bank currently has a loan book of Rs 43,000 crore, while its total deposit base stands at around Rs 67,000 crore. UBI today got listed on the Bombay Stock Exchange with a 17 per cent premium at Rs 77 against an issue price of Rs 66 per share.

On NSE, the shares were listed at Rs 74.9, a premium of 13.48 per cent. With UBI going public, Punjab and Sindh Bank is the only unlisted public sector lender now. Central Bank of India was the last PSU bank to get listed.

To purge their balance sheets by this fiscal-end, many banks either opted for one-time settlement of their defaulted advances or sold them off to ARCs.

NPA levels started rising in the system, particularly in the last one year, post the financial crisis that hit many businesses and resulted in job losses.

Top bankers, including State Bank of India Chairman, O P Bhatt had recently indicated that the slippages are likely to rise in the coming months and a substantial economic recovery is yet to take place.

However, rating agency Crisil had recently said that the pace of rise of NPAs is likely to slow down in the approaching months as companies are now in a better position to repay their loans.

The agency, which projected that gross NPAs in the system would grow to 5 per cent of the total assets by end-FY11 now expects the ratio to be around 4.5 per cent.