In an interview to CNBC-TV18's Latha Venkatesh & Sonia Shenoy, Deepak Narang, ED, United Bank of India spoke about the recent nod from the Reserve Bank of India (RBI) to consider loan proposals up to Rs.200 crore for highest rated borrowers.
The Kolkata-based public sector bank was barred from lending more than Rs 10 crore to any single borrower late last year after its bad loans rose to a record high and capital adequacy fell to 9 percent.
Below is a verbatim transcript of the interview
Latha: Can you tell us more on the Reserve Bank's instruction? Were you disallowed from giving loans up until now and has that been now removed?
A: Earlier, the RBI had put restrictions on us not to lend beyond Rs 10 crore to any company or any individual. We have been requesting RBI to permit us lending. We are getting deposit, our liability side is increasing, so we need to lend and increase our asset portfolio.
The RBI has permitted us to lend up to Rs 200 crore to AAA rated public sector undertaking (PSU) or corporate, but with the provision that certificate of deposits (CDs) ratio should not go beyond 70 percent, capital to risk assets ratio (CRAR) should not fall below 9 percent as of June 30, 2014.
Therefore, it's a welcome step. We have certain corporates lined up for lending and we will be taking a call on that.
Sonia: You had indicated earlier that you are focusing on higher recoveries and upgrades. Can you give us an expectation on what the recoveries and upgrades could look like in the next couple of quarters?
A: This quarter we have done about Rs 300 crore; cash recoveries have been good, around Rs 350 crore or so. We expect to close the quarter by recovering about Rs 700-800 crore; upgradation plus cash recovery.
This quarter was a bit slow in the sense we were busy with audit, election etc. However, the momentum has picked up now and we are going to be doing better. Rs 700-800 crore is in this quarter and about Rs 1,000 crore each quarter – September and December we should be targeting because we have fixed up a target of Rs 1,500 crore of cash recoveries for the whole year.
Latha: What would that bring your gross and net non-performing loans (NPLs) to this quarter?
A: This quarter it should come down around 10 because credit would pickup and recoveries would happen, so it should be 10; we will try to take it below 10.
Latha: How are margins doing for the current quarter?
A: Its inline with what it was in the earlier quarter because my operating profit is maintained, so I do not think there is any pressure on margin.
Latha: What about fresh generation of NPLs, do you suspect this quarter also, you will have any fresh generation of NPLs?
A: Banking generation of NPLs is normal and it would happen. Less than Rs 10 lakh - we are focusing on recoveries because its easy to get recovery and bigger accounts, of course it is very difficult to restructure and recover because corporate are under stress undoubtedly and that will be NPAs, not only with us, with other banks also.
Latha: Last quarter your slippages were about Rs 1,165 crore. Will it be as bad as that?
A: It will be less than that.
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