UBI won't lend aggressively despite removal of lending restriction: CEO

The bank will continue to focus on lending to retail and SME sectors

United Bank of India (UBI) will not lend aggressively, despite the Reserve Bank of India (RBI) deciding to remove the lending restriction imposed on the bank.

“I can certainly say that we will not lend aggressively. We will continue to lend carefully and focus on improving our asset quality,” P Srinivas, managing director and chief executive officer (MD & CEO), told Business Standard on Thursday.

He added the bank would aim to grow its loan book by 8-10 per cent in financial year 2015-16. “Only a few days are left for this financial year to end. We will have to plan for next year. We will evaluate our capital requirements and grow our loan book accordingly,” Srinivas said. UBI’s advances were Rs 64,899 crore at the end of the past quarter.

The banking regulator had imposed a cap on the size of loans UBI could offer, after the bank witnessed a dip in its capital adequacy ratio and deterioration in credit quality. Initially, the state-run lender’s loan sanctioning power was restricted to Rs 10 crore.

After the bank improved its finances the cap was relaxed and the lender was allowed to offer loans up to Rs 200 crore for top-rated companies.

RBI has now lifted the restriction completely. “In a communication received from the Reserve Bank of India, the restriction imposed on United Bank of India for sanction of credit or participation in restructuring proposals has since been removed. The removal has come in the wake of a meeting between P Srinivas, MD & CEO, UBI, and Raghuram Rajan, governor, RBI, earlier this month,” the bank stated.

However, there is a caveat to the removal of RBI’s restrictions. It has been lifted subject to the bank maintaining its capital adequacy ratio at 9.5 per cent and keeping credit-deposit (CD) ratio at or below 70 per cent. UBI’s capital adequacy ratio was 10.4 per cent according to Basel-III norms while the CD ratio was 61.75 per cent at the end of December 2014.

Srinivas said the bank will continue to focus on lending to the retail and small and medium enterprises (SME) sectors. “The relaxation will help in restoring normal functioning of the bank. It will help us in offering loans to corporates. But retail and SME will continue to be our core areas. At the same time we will continue to focus on loan recovery,” he said.

UBI’s shares gained over five per cent in Thursday’s trade closing at Rs 28.30 on the BSE.