Public sector lender UCO Bank, which reported a net loss of Rs 1,497 crore in the December quarter, is aggressively looking at recovering bad loans by selling properties of non-performing assets of over Rs 1 crore category through auctions under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act.
The Kolkata-based bank has given its approval to a number of lender consortia, in which it is a member, to initiate the strategic debt restructuring (SDR) scheme for four-five large companies. These large accounts constitute over R1,000 crore worth of bad loans for the bank.
UCO Bank’s asset quality during September-December deteriorated significantly, with the non-performing assets (NPAs) in absolute term rose by 56.67% year-on-year at R14,931.80 crore.
The lender’s NPA as a percentage of total loans increased sharply to 10.98% during the December quarter, against 6.50% in the year-ago period. Its net NPA ratio rose to 6.51% from 4.25%.
Like many other public sector lenders, it witnessed surged in bad assets as the Reserve Bank of India (RBI) asked the banks to reclassify loans following an extensive asset quality review.
“We are aggressively looking at recovering the money from many NPA accounts under over R1 crore category through auction of properties where we are the sole lender .We have already started the actions. The bank has many accounts like that,” UCO Bank executive director Charan Singh told FE.
The Sarfaesi Act permits banks to auction properties when borrowers default on repayments.
Singh said UCO Bank had already given its consent to the consortium of banks to go ahead with SDR norms for four-five big accounts involving more than R1,000-crore of bad loans for it.
“We have not reached the final stage as of now. The main problem in SDR is finding out a promoter. That takes time,” Singh pointed out, declining to give details of those big accounts.
Under the SDR rules, lenders are allowed to convert their debt into majority equity in a firm where they feel the need to change the management. Following rules put out by the RBI in June last year, bankers have decided to try out restructuring for a handful of companies including Electrosteel Steels, IVRCL, Jyoti Structures, Gammon India and Visa Steel, among others. However, lenders have not been able to usher in a new promoter at any of these firms although some deals are being negotiated.
UCO Bank had last year filed a recovery suit in the debt recovery tribunal (DRT) against Basmati rice exporter REI Agro. The bank leads a consortium of lenders which had lent to the company.
The 20-lender consortium alleged that the company had defrauded it to the extent of Rs 3,815 crore since 2013 through conspiracy, cheating and forgery.
Bankers observed that REI Agro was not a ‘fit case’ for strategic debt restructuring (SDR) as the CBI had registered a case against the loss-making company over alleged malpractices.
“No perspective change will take place in terms of asset quality in the fourth quarter. During the next fiscal, things will improve for the bank,” Singh said.
On the back of a whopping 160% surge in provisions and close to 48% decline in its operating profit, the bank posted a net loss of Rs 1,497 crore for the quarter ended December, against a net profit of Rs 303.59 crore a year ago. “No perspective change will take place in terms of asset quality in the fourth quarter.