UBI to bank on mining, steel sectors for turnaround

State-run lender United Bank of India does not see a remarkable turnaround in the bank unless industrial activity picks up in the iron and steel sector where it has major exposures.

The Reserve Bank has recently lifted ban on UBI lending.

"We have presence more in the eastern part of the country, where the major business activity is around iron and steel. Basing upon the large industries there are many small-small units. We have small exposure in all the major industries but in small units we have large exposure. Unless the mining, iron and steel industries comes out of the problem, it is very difficult for us to make a turn around," United Bank of India Managing Director and Chief Executive P Srinivas told PTI.

Around 58% of the bank's network is situated in eastern and 17.71% in north-eastern region of the country.

In March, RBI had relaxed one-year Prompt Corrective Action imposed on the bank on sanction of advances and participation in restructuring proposals, among others.

The ban was imposed in February last year following a major increase in bad loans in the quarter ended December 2013. In February 2014, the bank's then Chairperson and Managing Director Archana Bhargava took a voluntary retirement and it was headless till December 2014.

Srinivas was appointed as the new MD and CEO on December 31, 2014.

During the ban period, the bank was operating as narrow banking, taking more of deposits and investing it in treasury, and also focusing on recoveries.

Srinivas further said although the country has resources but it does not exploit and is importing raw material and finished products, which is affecting the economy.

P. Srinivas Managing Director & Chief Executive, United Bank of India

You have coal but you don't exploit your own coal and are importing coal. You have mines, you have iron ore and then also you are importing iron ore. You have so many iron and steel factories, and you are importing the finished goods.

Srinivas said at the cost of economic activity slowly India is becoming a market, which is a risk.

"Today, it is okay but after few years when these factories die down then the market fellow will increase his rates abnormally. When you have no production capacity then you have to purchase at that rate only," he said.

Srinivas said the two bigger concerns for the bank remain slippages from restructured accounts and recovery from large accounts.

"Three years back we thought that in the next three years things will be very normal and so we had given everybody two years gestation period and asked them that after two years you repay. Two years have completed and they are all due for repayment. But there is no change in scenario. Slippage from restructured accounts is worrisome," he said.

In the fourth quarter of FY15, the bank restructured Rs 2,400 crore of accounts, of which Rs 2,000 crore worth accounts were of large companies.

Total fresh slippages in the fourth quarter was Rs 485 crore and slippages from restructured accounts stood at Rs 201 crore and the balance was from standard accounts.

"At least for 2-3 quarters, there may not be any great slippages. But afterwards the problem will start. Before the end of the current year, if the market doesn't pick up then there will increase in slippages," Srinivas added.

The bank has Rs 3,000 crore of large value loans and around Rs 2,000 crore of small loans.

P. Srinivas Managing Director & Chief Executive, United Bank of India

The recovery position in small loans is good. But about Rs 3,000 crore are high value accounts where our stake is small and we are not the leaders anywhere. We cannot arm twist the borrowers. The recovery from large accounts is a concern for us.

In the year ended FY15, the bank's year-on-year credit growth stood at 1.6% and deposit growth at -2.41%. With lifting of ban on advances by RBI, the bank is now looking at a credit growth of 10% in FY16.

"Now as RBI has removed those restriction, I will be able to have a reasonable increase in credit this year. At March 31, our total advances reached at Rs 69,000 crore and I am expecting about 10% increase in the credit," Srinivas said.

He said the bank will also increase share of retail and MSME in its loan book from 17.45% and 15%, respectively, to over 20%.

In FY15, the bank's gross non performing assets was at 9.49% as against 12.03% in December quarter and 10.47% in the period ended March 31, 2014.

The bank expects to bring down the NPA position this year with higher credit growth.

"We are ultimately aiming to bring it (NPA) down to around 7% by end of this fiscal, provided there is recovery in credit and there should not be any major hit in the restructured accounts," Srinivas said.

The bank may also go for raising Rs 300-500 crore from tier I bonds this year, he said.