Union Bank of India intends to raise ₹2,000 crore to ₹3,000 crore of capital to provide additional buffer in view of the non-performing assets (NPAs) that might arise due to the Covid19 pandemic.

“We will go for QIP next month to raise ₹2,000 crore to ₹3,000 crore of capital,” G Rajkiran Rai, Managing Director and Chief Executive Officer, Union Bank of India, told BusinessLine on Friday.

“We expect Covid-driven NPAs to be in the tune of 2 to 3 per cent of our total book. While we are already adequately capitalised as of now, we intend to have an additional cushion,” said Rai.

For Union Bank, Gross NPAs and Net NPAs stood at 14.71 per cent and 4.13 per cent, respectively, as of September 2020. “These numbers are lesser than the June quarter numbers,” the CEO said.

The Covid impact might not be as severe as was expected earlier. “Today, if you look at the restructuring requests, they are lower than expected. The loan restructuring window came to an end last month (except for MSME borrowers), and with economic activity on the mend, collection efficiencies are expected to improve further,” said Rai.

With an expected optimism in overall demand sentiments in the economy, repayments may further improve. “At least by the second half of FY22, the situation is expected to improve to pre-Covid levels,” he added.

When asked if the festival season had given any boost to retail loans, Rai said there was ‘significant’ retail business, driven by home loans and vehicle loans.

Margins

On the Net Interest Margin (NIM) trajectory for his bank, the CEO said: “NIM is expected to be in the range of 2.50 to 2.60 per cent for the FY21, driven by higher interest income on investment book and declining cost of deposits.”

Union Bank’s low-cost deposit base (CASA) was at 34.61 per cent as of September 2020. It expects to see it grow to around 35.5 per cent by March, 2021.

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