United Bank of India sees NPAs silver lining, but first this critical thing has to happen

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Published: October 21, 2017 4:12:15 AM

United Bank of India is hoping to bring down its total amount of non-performing assets (NPAs) to a significant level once some of the large stressed asset cases, identified for bankruptcy proceedings by the Reserve Bank of India, are resolved.

United Bank of India, United Bank of India NPA, NPA of United Bank of India, NPAs silver lining, RBI on United Bank of India, bankruptcy proceedings, NCLT, NPA ratio, bank’s asset qualityThe state-run lender has exposure to seven of the 12 large stressed accounts which have been featured on the RBI’s first list.

Saddled with the high-level of bad loans, United Bank of India is hoping to bring down its total amount of non-performing assets (NPAs) to a significant level once some of the large stressed asset cases, identified for bankruptcy proceedings by the Reserve Bank of India, are resolved. The state-run lender has exposure to seven of the 12 large stressed accounts which have been featured on the RBI’s first list. The bank’s overall exposure to these seven accounts is around Rs 2,500 crore. “Once these cases are settled, there will be a big improvement in our NPA position. In these seven accounts, if some cases are decided to that extent, the NPA level will come down,” a top United Bank of India official told FE on condition of anonymity.

In June, RBI had asked banks to refer a dozen troubled companies for insolvency proceedings at the National Company Law Tribunal (NCLT). The total exposure to these 12 companies adds up to a little over Rs 2 lakh crore, or about 30% of more than Rs 7 lakh crore worth of gross NPAs in the banking system. The central bank said the accounts on the first list constitute about 25% of the current gross NPAs of the banking system.

“Our target is to bring down gross NPA ratio by the end of the current fiscal. Our main focus is on recovery. And, if some positive developments take place for the NCLT-referred cases before this fiscal-end, then definitely there will be a significant reduction in bad loans,” the banker cited above said, adding the extent to which the gross NPA ratio could go down also depended on recovery of bad loans and quantum of sales to asset reconstruction companies (ARCs).

The bank’s asset quality worsened further in the June quarter with its NPAs as a percentage of total loans rising to 17.17% from 14.29% in the corresponding period last fiscal. During the quarter, NPAs in absolute term rose 20.25% year-on-year to Rs 12,164.90 crore.

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