State-run United Bank of India on Wednesday said the Reserve Bank of India has prescribed certain “additional actions” under the Prompt Corrective Action (PCA) framework against it over its high net non-performing asset (NPA), low leverage ratio and capital needs. In a stock exchange filing, the city-based lender said, “The Reserve Bank of India vide letter dated December 19 has prescribed certain additional actions under Prompt Corrective Action (PCA) framework, in view of high net NPA, low leverage ratio and requirement to raise capital, based on the assessment of the bank’s position as on March 31, 2017.”
The action was focussed on profit retention, capital augmentation, provision coverage, diversification of credit portfolio, rationalisation of expansion and cost control, the filing stated.
As on March 31, the bank’s net NPA in absolute term was Rs. 6591.85 crore, while net NPA ratio stood at 10.02%. Gross NPA in absolute term stood at Rs.10952 crore. For FY17, its net interest margin (NIM) was at 1.60%, while capital adequacy ratio under Basel III norm was at 11.14% with Tier 1 at 7.69%. In the last fiscal its net profit stood at Rs.219.51 crore as against a net loss of Rs.281.95 crore in the previous fiscal.
“The normal banking activity viz acceptance of deposit, credit disbursement and treasury function remain unaffected and unaltered,” the public sector lender said, adding the recent regulatory action initiated by the central bank was not likely to have any material impact on its performance and would contribute to the improvement of the interal control and intrinsic strength.
United Bank reported a whopping net loss of Rs. 344.83 crore for the second quarter this fiscal against a net profit of Rs. 43.53 crore for the corresponding period last fiscal. The lender had posted a net loss of Rs. 211.46 crore for the first quarter of the current fiscal.
The bank’s asset quality worsened further in the September quarter. Gross NPAs in absolute term rose 15.8% year-on-year at Rs. 12892.67 crore during the period. Gross NPA as a percentage of total loans rose to 18.80% in the September quarter this fiscal from 16.26% during the same period previous fiscal. Provisions and contingencies rose 87.8% y-o-y to Rs. 753.09 crore from Rs. 401.03 crore in the corresponding period of FY17.