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Kolkata: The Reserve Bank of India (RBI) on Wednesday lifted lending restrictions put on United Bank of India and said the bank is free to lend, provided its capital adequacy does not fall below 9.5%.

Capital adequacy is a measure of a bank’s financial strength.

In November 2013, the RBI banned the bank from lending over 10 crore to a single borrower after the bank’s bad loans piled up and some restrictions were gradually lifted. Till Wednesday, the bank could lend up to 200 crore to customers having good track records.

The management met the RBI governor this month and explained in detail the bank’s roadmap for a turnaround, said P. Srinivas, United Bank’s managing director and chief executive officer. The bank has notified the stock exchanges that the RBI has now withdrawn the lending restrictions.

The lending restrictions over the last one-and-a-half years acted as a “boon in disguise", as the bank’s management and employees got a chance to reconcile and put all their efforts into recovery of bad loans, Srinivas said over phone. “One needs complete freedom in banking and the lifting of the lending restrictions is a new lifeline for us," Srinivas said.

The RBI has put conditions for lifting the ban—the bank should not allow its capital adequacy ratio (CAR), expressed as the ratio of capital to risk-weighted assets, under Basel III norms to slip below 9.5% and the credit–deposit ratio (CD ratio) should not exceed 70%.

At the end of December, the bank’s CAR was at 10.4%, up from 9.01% a year ago. The regulatory minimum is 9%.

The bank’s CD ratio is now at around 60%, Srinivas said.

The bank’s gross non-performing asset (NPA) ratio, however kept rising till December to 12.03%, up from 10.82% a year ago, partly because of the credit squeeze but was likely to come down in the coming quarters, said Srinivas, adding that he expected gross NPA to come down below 10%, “as and when we succeed in raising advances to over 69,000 crore and bring down gross NPA further down to 6,900 crore." The bank’s gross NPAs at the end of December were at 7,809 crore.

The bank would focus at “improving bottom line rather that boosting topline and would lend to corporate and small enterprises selectively," he said.

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