Uco Bank hopes to return to profitability by FY18, plans to sell bad loans worth Rs. 2000 cr

By: | Published: June 29, 2016 6:34 PM

State-run Uco Bank, which slipped into the red last fiscal on account of high provisions to cover huge surge in bad loans, is expected to return to profitability by the next fiscal, bank's MD and CEO RK Takkar said on Wednesday.

Uco Bank is planning to raise funds of around Rs.3000 crore through issuing tier I and tier II bonds in this financial year. It also hopes to get about Rs. 2000 crore from the government’s fund infusion programme. (Express Photo)

State-run Uco Bank, which slipped into the red last fiscal on account of high provisions to cover huge surge in bad loans, is expected to return to profitability by the next fiscal, bank’s MD and CEO RK Takkar said on Wednesday.

Takkar said the Kolkata-based bank is focussing on “pro-active management of asset health” through close monitoring of loan accounts and going all out to recover bad loans to bring down non-performing assets (NPAs) level.

Also Read: UCO Bank net loss at Rs 1,715 crore

In a bid to clean its balance sheets, the lender is also planning to sell 20 loans accounts, with loans worth around Rs. 2000 crore, to asset reconstruction companies (ARCs) in the next few quarters.

Notably, Uco Bank was the worst performer among the public sector banks registering highest increase in NPAs in percentage terms against total loans in the last financial year. As on March 31, 2016, its gross NPA ratio stood at 15.43% with gross NPAs in absolute term was at Rs. 20,908 crore.

Although the bank registered an operating profit of Rs. 3603.39 crore during the last fiscal, it incurred a net loss of Rs. 2799.25 crore due to a whopping Rs. 6403 crore provisions and contingencies.

Speaking at the company’s annual general meeting, Takkar said Uco Bank’s employees were hitting the streets and protesting at the residence and workplaces of defaulters to recover bad loans from them.

He said the bank was experiencing ‘good recovery’ of bad assets in the sectors like MSME, agriculture and small retails, but loan recovery from larger accounts would be the key as mid and large scale industries accounted for over 50% of its loan portfolio.

“SDR (strategic debt restructuring) is not working, but we are open to sustainable restructuring. As the scheme (Scheme for Sustainable Structuring of Stressed Assets) has come out recently, things are being worked out. By next quarter, I think things should start moving,” the CEO told the reporters.

“The main thing is the resolution of big corporate accounts and their sustainable restructuring…If something can be worked out in bigger accounts, then it could help us cut down the NPAs,” he averred.

The state-run lender was focussing on mobilising low-cost CASA deposits in much greater numbers and acquiring more quality assets in retail and MSME segments, as its corpus of fund from interest-free deposits on account of rupee-trade mechanism scheme with Iran has been shrinking. “For the time being the sanctions on Iran are lifted. So rupee fund is not functional. No credits, only the debits are taking place…may be in the next six months to one year the account may become nil,” Takkar informed.

Uco Bank is planning to raise funds of around Rs.3000 crore through issuing tier I and tier II bonds in this financial year. It also hopes to get about Rs. 2000 crore from the government’s fund infusion programme.

The bank’s capital adequacy ratio under Basel III rules stood at 9.63% at the end of March quarter last fiscal. Its scrip on Wednesday closed at Rs. 41.90, up 2.70% on BSE from the previous close.

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