United Bank of India to cut NPAs by 10% every year

UBI is adequately capitalised as of now and this obviates the need for fresh capital infusion

Kolkata-headquartered United Bank of India (UBI) battling swelling NPAs (non-performing assets) aims to prune them by 10 per cent each year. The public sector lender presently has a gross NPA of Rs 10,800 crore which is 15.6 per cent of its advances. Its net NPA stands at 10.1 per cent.

“We have formed a special team for recovery (of bad loans). Special powers have been given to the branches for one-time settlement (OTS). We are reducing our NPAs, and each year, we want to reduce it by 10 per cent’’, said Pawan Bajaj, managing director and chief executive officer (CEO) of UBI.

He dismissed fears on the possibility of the bank facing sanctions from the Reserve Bank of India (RBI) due to its ballooning NPAs. “That’s only an assumption. Besides, we have very little exposure to the highly stressed corporate accounts’’, Bajaj said on the prospect of RBI initiating corrective measures against UBI.

The rise in stressed loans of UBI has positioned it as the second category offender for breaching the risk limits under the Prompt Corrective Action Measures (PCA) issued by the RBI last month. The second category threshold limit for net NPA is fixed at nine per cent which the UBI has already crossed.

Steel and power sectors are contributing to the high NPAs of UBI. “In the future, we will be careful in lending to steel and power sectors. Credit flow would depend on the company ratings”, said Bajaj.

With a total business of Rs 1.97 lakh crore (as on March 31, 2017), UBI is focusing on expanding credit to agriculture, retail and MSME (micro, small & medium enterprises) sectors. It has a predominant presence in West Bengal and seven North Eastern states which account for 60 per cent of the bank's total business.

UBI has a CD (credit deposit) ratio of 55 per cent- its less than the pan-India average of 62 per cent for the banking industry. “As we are operating in less industrialised areas, our CD ratio is less than the national average. There is a lack of corporate advances for the region as a whole”, he said.

The bank is adequately capitalised as of now and this obviates the need for fresh capital infusion. The public sector bank has raised Rs 127 crore through Qualified Institutional Placements (QIP) and Rs 200 crore by bonds that are Basel-III compliant. Besides, the Government of India has infused capital of Rs 418 crore into the bank.

UBI has approval of its board to raise fresh capital of Rs 1000 crore and this would be done whenever the bank needs additional capital.