For the turnaround, the bank is betting on recovery of stressed assets, mainly through the bankruptcy proceedings under the provisions of the Insolvency and Bankruptcy Code (IBC).
Public sector lender Uco Bank is looking to recover more than Rs 4,000 crore from bad assets in this financial year by means of cash recovery and upgradation to clean up its balance sheet. The bank hopes a lower non-performing asset coupled with a higher credit growth, backed by the government’s proposed mega recapitalisation, would bring down its high level of gross NPA ratio. With around Rs 24,435-crore gross NPA in absolute term at the end of the second quarter, the bank’s gross NPA as a percentage of total loans stood at a whopping 19.74%. “Yes, it should improve now with the increase in our credit. Once we get the capital, we can grow our credit. And, also when the NPA level comes down, obviously that percentage should improve,” Uco Bank MD & CEO Ravi Krishan Takkar told FE when asked whether he has set any target to bring down the GNPA ratio by end-FY18.
“We are looking to recover over Rs 4,000 crore in this fiscal through cash recovery and upgradation. In the second quarter, cash recovery and upgradation stood at around Rs 1,100 crore,” he said in an interview over phone. On the quantum of capital infusion, which he expects into his bank from the government’s massive recapitalisation plan over the two-year period, Takkar said, “It will depend on how much will be allocated to the other banks. The amount is not yet crystallised. I mean in what form it will come, how much will be the recapitalisation bond and how much would be the debt infusion, that is yet to be finalised. I think that is being worked on.”
He said Uco Bank would need around Rs 7,000-crore capital for the current fiscal and the next fiscal, taking into account additional provisioning requirements depending on the number of insolvency cases and expected credit growth during the period. As per its turnaround plan, the bank expects to return to profits in two years. The Reserve Bank of India (RBI) had initiated a prompt corrective action (PCA) against it in view of high non-performing assets and negative return on assets (RoAs) for the two consecutive years.
For the turnaround, the bank is betting on recovery of stressed assets, mainly through the bankruptcy proceedings under the provisions of the Insolvency and Bankruptcy Code (IBC). The lender is also focussing on the retail and MSME segments for a higher growth in credit. It is looking at a credit growth of about 5-6% for this fiscal. “The main focus will be on recovery, hopefully through the NCLT process, OTS (one-time settlement) or normal recovery. It should help the bank return to the black. Our provision coverage ratio (PCR) is quite healthy at 63%. So, we are making adequate provisions. Once the recovery happens, then not only we may have to write back on a case-to-case basis, we will have fewer requirements for provisioning,” Takkar said.
The state-run lender has exposure to nine of the 12 large stressed accounts, which have been featured on the first list of the RBI. Its overall exposure to these nine accounts is around Rs 4,300 crore. Further, the bank has an exposure to as many as 16 of the 29 firms, identified by the RBI to be resolved through any of its schemes before December 13, failing which, they will have to be taken to the National Company Law Tribunal (NCLT) by lenders by December 31. Uco Bank’s total exposue is around Rs 4,000 crore in these 16 accounts.
“Once cases are referred to the NCLT, it will need higher provisioning. So, in our overall capital requirement, we have included these cases (16 accounts),” the CEO informed. The bank has also been selling stressed assets to Asset Reconstruction Companies (ARCs). In the second quarter, it offloaded exposures in as many as seven stressed accounts to ARCs for Rs 240 crore. “In this financial year, we expect around Rs 1,000 crore to come from ARC sales,” Takkar added.
Uco Bank’s net loss widened by close to 62% year-on-year to Rs 622.56 crore for the second quarter this fiscal from Rs 384.83 crore for the same period last fiscal. During the first quarter of FY18, the lender had posted a net loss of Rs 663.02 crore. On Monday, the bank’s scrip fell by 1.53% to end the day at Rs 32.10 on the BSE.