UBI plans to rejig SME loans, capital

In tune with the Reserve Bank of India’s (RBI) policy of restructuring loans for small and medium exnterprises (SMEs), Kolkata-based public sector lender United Bank of India (UBI) is planning to restructure loans for the SME sector. The bank’s total SME portfolio at present is Rs 3,100 crore.

The UBI’s board today also approved its long-pending capital restructuring plan, under which its paid-up capital will come down from Rs 1,532 crore at present to about Rs 226 crore. The bank is also mulling to return the remaining capital to the government.

The restructuring would be complete by the end of this financial year, said S C Gupta, chairman and managing director of UBI, at an interactive session at Merchants’ Chamber of Commerce in Kolkata today.

The bank is also planning to raise Rs 1,000 crore through a perpetual non-convertible issue this year.

Under the loan restructuring plan for SMEs, the bank will provide additional finance and reduce margin and security requirements for SME advances, said Gupta.

The efforts are a part of a comprehensive package for the SME sector, whereby the bank may also offer loans at 1 per cent discount.

“Even if some accounts are non-performing, but viable, we will see that they are brought back to health with some support from the bank,” said Gupta. The move is aimed at reducing the bank’s net NPA level, which currently is 5 per cent for the SME sector and 2 per cent overall.

The bank hopes to bring down the NPA level by half a per cent by March 2009.