Public sector lender Union Bank of India aims to recover Rs 9,000 crore from bad loans in the next two quarters and improve its asset quality further during the year, A Manimekhalai, MD & CEO, tells Sachin Kumar. She shares the bank’s strategy to boost credit growth, capital raising plans and plans to protect its net interest margins. Excerpts:
What are your plans for recovery from bad loans in the next two quarters?
Our target for recovery in the next two quarters is Rs 9,000 crore. For the full financial year, we had given a guidance of Rs 16,000 crore. We have already done close to Rs 7,000 crore and the remaining will be done in the next two quarters. We do not see any challenge in meeting this target. Last year, we had set the target of Rs 16, 000 crore, but were able to recover Rs 20,000 crore.
The bank’s asset quality has improved during the quarter, but GNPAs (Gross Non-Performing Assets) continue to be high. How do you plan to reduce it?
We had given the guidance to bring the GNPA level to below 6% and we are at 6.38%. Our GNPA declined by 207 bps year-on-year to 6.38% and net NPA reduced by 134 bps year-on-year to 1.30% as of September 30 this year.
We have come out with various schemes and will be able to do substantial numbers under them. There are also plans to restructure accounts in the agriculture segment. We have put in place strategies and in the current quarter, we are expecting to see a substantial reduction in GNPAs. Our slippages have also come down drastically over the period. Currently, we have nearly Rs 2,800 crore of quarterly slippages. With this rate of recovery and fall in slippages, we will be able to improve the GNPAs level.
The bank’s credit growth was less-than-expected in the first half. What are your plans for credit growth in the second half?
There was a shortfall in advance growth in the first half, but the second half is usually better in terms of loan demand. At the beginning of the year, we had given the guidance of 10-12% advance growth in the current year and we have grown by 9.5% so far. We still have two more quarters and I am confident we will be able to achieve our full-year guidance. The festive season has begun which will also boost the demand for credit.
The bank has been able to improve its net interest margins (NIM). Can we see further improvements, going forward?
We should be able to protect our NIM at 3% in the next two quarters. About NIM, we had said earlier that it should be in the 2%-3% range but we have considerably expanded it. The net interest margin of the bank expanded to 3.18% during the second quarter compared to 3.15% in the same quarter previous year and 3.13% in the first quarter of the current financial year. We are confident that we will be able to protect our NIM at 3% in the current year.
What are your capital raising plans for the coming quarters?
We have already raised Rs 5,000 crore in the current financial year. We plan to raise around Rs 2,000 crore through a qualified institutional placement (QIP) by the end of this calendar year. After the QIP, the government’s shareholding in the bank will come down to 75% from 76.98%.
Your CASA ratio has seen a marginal year-on-year decline in the current quarter. Are you worried about this decline?
In our case, we have not seen any decline in the CASA of individuals and it is only the institutional CASA which has come down. So we are not worried about it. What we should be worried if the absolute numbers are growing or not. In our case, the absolute numbers are growing. Sequentially, our CASA ratio moved from 34.60% in the first quarter to 34.66% in the second quarter.