United Bank is not a candidate for merger, says MD & CEO A K Pradhan

'The government is sincerely looking that banks should come out of the PCA', said United Bank MD & CEO A K Pradhan

The Kolkata-based United Bank of India (United Bank), which has been struggling with losses and dud-loans hopes to come out of the prompt corrective action (PCA) framework by the end of Q2 of fiscal’20. And the infusion of capital has come as a great relief after a long wait. The bank has suggested the Centre reduce its stake through disinvestment; and is clear it is not a candidate for a merger given its unique geographical and demographical positioning. A K Pradhan, managing director and chief executive officer spoke to Namrata Acharya on the plot ahead. Edited Excerpts:

What is strategy to come of out of the PCA framework?

Things are panning out the same way as we had thought of. In 2017-18, we recovered about Rs 110 crore; and in 2018-19, expect to recover Rs 300 crore. In the present and the next quarter, we expect a reasonable number of resolutions to take place under the National Company Law Tribunal (NCLT). That will help us reduce our gross and net non-performing assets (NPA). So, by the end of Q2, we should be <able to come out of the PCA without additional government support. Also, we should be in profit very soon. I don’t see any reason for not being profitable on a quarter on quarter basis. Thereafter, we plan to raise Rs  500 crore through a qualified institutional placement. This apart, we have taken nearly 34 accounts to the NCLT or we are lead-bankers. As of now, that is not supporting us. Hopefully in the next six months this should see some momentum.

What gives you the confidence that things will move faster under the NCLT hereon?

In the last three to four months, out of the 34 cases where United Bank is the lead (bank), only two were admitted. So, in the next six months, fresh admissions should take place; and it is a reasonable timeframe for resolutions to happen. This is the job which NCLT is supposed to do, as they cannot sit on cases forever.

If resolutions don’t happen in time, due you foresee strain in balance sheet due to higher provisioning?

In NCLT cases, close to 75 per cent provisioning has been done. I would expect 30-35 per cent realisation on an average from NCLT cases in the coming days. The realisation will be low in the second list of cases referred to NCLT by the Reserve Bank of India (RBI) as the asset quality is not very good. In the second list, out of the 28 accounts, we have exposure in 12 with an exposure of Rs 2,200 crore. The haircut will be substantial.

Do you expect any additional capital support from the government to come out of PCA?

We had a discussion with the government on the roadmap to come out of the PCA. As of now, they do not have any additional capital infusion plan in the present financial year. Having said that, the government is sincerely looking that banks should come out of the PCA. If at all there is a need the government might infuse some more capital in two to three banks, including United Bank. Overall, I think 2019-20 should be a turnaround year for many banks, because of resolutions under NCLT and other recovery measures.

The Centre’s shareholding in the bank is now at 95 per cent, but the Securities and Exchange Board of India’s norms require it to be at a minimum of 75 per cent…

Our share price has been subdued for sometime. I expect positive results, and the valuation should improve. We have suggested to the government that it should offload part of its stake to bring it down to 75 per cent as it is not possible for the bank to raise this amount of capital. Perhaps the government could offload shares to the public at large. If the bank is giving some value, people would like to own shares. Additionally, we would also go to the market to bring down the shareholding.

Is UBI a candidate for merger?

We are uniquely placed as a bank. We have a huge presence in the East and north-East. We cater to senior citizens; and a large number of pension holders bank with us without any hassles. We cater to micro-, medium-and small-enterprises, particularly the tea industry in the East. Hence, because of people’s trust and geographical reasons, It is not a candidate for merger. Rather, we would say, other commercial banks which have a presence in this part of the country, should be merged into United Bank  So that the unique positioning of the bank is maintained.

Has there been talks in this direction?

No. These are all theoretical discussions. The government has declared that they would bring down the number of banks. So, there is a possibility a few more banks will be merged. But my appeal is that United Bank —because of its unique positioning — retain its independence.

The RBI recently penalised United bank and many other state-run banks for non-compliance with SWIFT. What steps are being taken to comply with the requirement?

The RBI had given direction that the SWIFT mechanism should be in a manner that obviates human intervention. They had called bankers for a meeting, and we explained the reasons for the delay. About 36 banks have been penalised. Our explanation was not acceptable to RBI and hence the penalty. But now we have been able to meet RBI’s norms.