Expect some clarity on MTNL resolution this quarter: UCO Bank MD & CEO

A year ago, our CD ratio was 67.25 per cent, and it has now reached 71.77 per cent. This improvement is largely a result of the aforementioned credit growth

UCO Bank is planning to raise up to Rs 2,000 crore through qualified institutional placement (QIP) in the December quarter to meet minimum public shareholding (MPS) norms. In a telephonic interview, the bank’s Managing Director and Chief Executive Officer Ashwani Kumar told Harsh Kumar the state-owned bank was focusing on maintaining its Current Account Savings Account (Casa) ratio, which has remained around 38 per cent over the past four to five quarters. Edited excerpts:

 

What is your guidance on your credit–deposit ratio?

 

The improvement in our bank's CD (credit-deposit) ratio for Q2FY25 is primarily due to an increase in credit growth. In contrast, deposit growth has been relatively lower. When deposit growth lags, a higher credit growth naturally leads to an improved CD ratio.

 

A year ago, our CD ratio was 67.25 per cent, and it has now reached 71.77 per cent. This improvement is largely a result of the credit growth. Regarding our deposit growth, over the last three to four quarters, we observed the following trends: In September 2023, deposit growth was only 6 per cent, aligning with a CD ratio of 67 per cent. During that period, we had no immediate need for funds, so we chose not to aggressively pursue deposit growth, especially given the high costs associated with bulk deposits. We are focusing on maintaining our Casa ratio, which has remained around 38 per cent over the past four to five quarters.

 

What have been the total recoveries made so far?

 

During the July-September quarter, Rs 414 crore was recovered from resolution and liquidation combined. Recovery through the resolution process during the period was Rs 393 crore, significantly higher than the year-ago figure of Rs 82 crore and the June quarter's Rs 34 crore.

 

The major recovery we made from corporate is from the power sector. Recovery under the National Asset Reconstruction Company Ltd (NARCL) - the government-backed bad bank - during the quarter was negligible, with only one account worth Rs 4 crore resolved.

 

How is UCO Bank learning from previous incidents, and working on enhancing its digital infrastructure?

 

We have seen significant improvements in enhancing our digital infrastructure. Regarding security and IT spending, we have allocated around Rs 1,000 crore for IT expenditures for FY25 which includes investments in digital infrastructure, hardware, and software. So far, we have spent approximately Rs 350 crore. The remaining budget is earmarked for ongoing projects that are currently in the evaluation or approval stages. We are consolidating our data centers and conducting firewall refreshes. We have established a Network Operations Center (NOC) to enhance our operational efficiency. We are in the process of setting up a virtual machine environment and an API (Application Programming Interface) gateway to facilitate integration with corporate clients. This integration is essential to ensure that our core systems remain undisturbed while allowing for seamless connectivity.

 

What is the status of MTNL exposure?

 

In the case of MTNL, we are working through the Joint Lender Forum, of which our bank is a member. Various options for resolution are currently being discussed, but nothing has been finalised yet. It may take a bit more time to determine the exact nature of the resolution, but we expect to have some clarity within this quarter. The initiative is being led by Union Bank of India and Indian Overseas Bank, as they have larger exposures in this matter.

 

How is UCO Bank planning to raise funds through the qualified institutional placement (QIP) route?

 

We plan to raise up to Rs 2,000 crore through the QIP route during the December quarter to meet minimum public shareholding (MPS) norms. However, we are open to other options of disinvestment as well. We have received government approval for Rs 4,000 crore, but we will proceed with the first tranche of Rs 2,000 crore. Depending on market conditions, we may consider another tranche next year. If everything aligns favorably, we will aim for further reductions. Ultimately, it is up to the government to decide when and how much to offer for sale.