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United Bank of India is expecting to recover close to ₹6,000 crore from its stressed assets this fiscal.
According to Ashok Kumar Pradhan, Executive Director, United Bank of India, nearly ₹4,000 crore would come from the resolution of cases under the Insolvency and Bankruptcy Code (IBC) and the remaining (₹2,000 crore) from the sale to asset reconstruction companies (ARCs).
The bank currently has around 39 accounts at the National Company Law Tribunal (NCLT), totalling ₹6,400 crore.
Of these, nearly ₹5,200 crore comes from the 19 accounts that fall under the list identified by the Reserve Bank of India.
“This financial year we are looking at ₹4,000-crore settlement under the NCLT window, and another ₹2,000 crore in the first two quarters of FY20,” Pradhan told BusinessLine . As per the assets identified by the RBI, the first list had 12 accounts, while there were 28 more in the second list. The bank has close to 12 accounts falling under the second list, with a total exposure of ₹1,700-1,800 crore.
The bank has already received ₹489 crore from the settlement of one account – Bhushan Steel. While it had to take a haircut of around 33 per cent on the account, he feels that it is the “best possible settlement” under the NCLT window.
Pradhan fears the haircuts to be much higher in the case of accounts on the RBI’s second list as their asset quality is “very poor”.
“We are apprehensive that we might not be able to recover more than 33-35 per cent from these accounts. That will be the biggest hit bankers are looking at,” he said. United Bank has a ₹300-crore exposure in Electrosteel, and is expecting to recover about one-third of the amount. For the sale of ₹2,000-crore worth of bad loans to ARCs, the bank has already floated request for proposal (RFPs). The bank had sold close to ₹1,800-crore worth of stressed loans last year.
Apart from this, the bank is also hoping to recover some money from the debt recovery tribunal (DRT). United Bank, Pradhan said, has about 4,000 cases involving ₹7,400 crore stuck in DRTs; of these, close to 900 cases have been stuck for more than five years, involving ₹1,800 crore.
“That platform (DRT) we are not able to utilise because the State administration, particularly the district and police administration, are not giving us the desired support. In the process, a large number of cases are stuck for enforcement. We are asking the government to strengthen the DRT mechanism and securitisation law,” he said. If the DRT window is activated, it will help banks resolve NPA problems in a big way, he added. For the quarter ended March 31, 2018, gross NPA increased to ₹16,552 crore (₹10,952 crore), while net NPA stood at ₹10,316 crore (₹6,592 crore).
The percentage of gross and net NPAs to total advances stood at 24.1 per cent (15.53 per cent) and 16.49 per cent (10.02 per cent), respectively.
United Bank had breached the risk threshold under the Prompt Corrective Action (PCA) measures due to a steady rise in stressed assets. The RBI had also initiated additional actions under the PCA in view of high net non-performing assets, low leverage ratio and the need to raise capital in December 2017.
Apart from branch rationalisation and containing overhead expenses by refraining from recruiting additional manpower, the bank is also working towards improving its profitability by growing its core business.
The bank is seeking ₹2,000-crore capital support from the government to grow its business. It hopes to be able to earn profit in the fourth quarter of this fiscal.
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