Kolkata: Kolkata-based United Bank of India (UBI), which has a gross non-performing assets (NPA) ratio of 24.1%, will cap corporate loans to a single borrower at ₹ 150 crore, managing director and chief executive officer Pawan Bajaj said.
To bring NPAs down, UBI’s credit-deposit ratio—currently at 53%—must improve, Bajaj said in an interview. Because of deteriorating asset quality, the bank has allowed its corporate loan book to shrink by around ₹ 6,000 crore to ₹ 26,000 crore during the year till 31 March, Bajaj said.
This portfolio is expected to shrink further by around ₹ 4,000-5,000 crore in the current year. The share of corporate loans in the bank’s total assets is at 28% now. It will be brought down to 25%, Bajaj said.
To expand its loan book, the bank will focus on the retail and farm sectors, apart from small and medium enterprises. While giving loans to companies, the bank will make sure borrowers have a minimum credit rating of BBB+, according to Bajaj.
The bank will not lend to stressed sectors such as steel and power for now. Its outstanding loans to the steel sector alone is ₹ 3,900 crore.
Retail lending is growing fast and is expected to rise by 18-20% in the current year. Retail assets currently account for 22% of the bank’s loan book. By the end of the current year, it is expected to go up to 25%, Bajaj said. The aim is to “spread risks across segments".
Even as he said the worst was “almost over", the bank is bracing for at least three more quarters of pain. By the end of December, gross NPA is expected to drop from ₹ 16,552 crore at the end of March to ₹ 7,500-8,000 crore, he said.
Accounts worth ₹ 6,000 crore are undergoing insolvency resolution at different benches of the National Company Law Tribunal (NCLT), Bajaj said. The bank has recovered ₹ 600 crore from Bhushan Steel Ltd. More accounts worth around ₹ 3,500 crore are to be referred to the NCLT soon.
To shore up its capital base, the bank is looking to raise around Rs1,000 crore through various instruments including sale of shares to employees and institutional investors. The bank has applied to the Securities and Exchange Board of India for permission to sell shares to its employees to raise ₹ 50-60 crore. This would help the bank lend ₹ 500-600 crore, according to Bajaj.
The bank is looking to raise up to ₹ 400 crore through a sale of shares, starting within two months, he said.