United Bank of India steps up turnaround efforts

Kolkata-based United Bank of India has trimmed its workforce by 700-800 in the past one and half years as a part of its turnaround plan. 

While the bank has not retrenched any employees, it has been selectively hiring to replace retired ones.

The bank has identified about seven to eight urban branches for possible merger with bigger ones by the next quarter. Also, the bank is looking to sell non-performing assets (NPAs) of about Rs 1,500 crore to asset reconstruction companies (ARCs) by the next quarter, and so far it has sold about Rs 350-400 crore to ARCs. 

The bank is going for a one-time settlement for small and medium corporate accounts as part of its restructuring exercise. Last year, the bank got back about Rs 1,200 crore through recovery. 

“We have now special officers in regional offices for NPA recovery, and we have also strengthened our credit recovery team. We have given time to various regions that even after taking corrective measures there is no change, then we will close down branches in next quarter. We have identified 8-10 non-viable metro branches to merged. Also, Our CD ratio is 54 to 55 per cent, that we want to take to 65 per cent to 68 per cent,”’ said Pawan Kumar Bajaj, Chief Executive Officer and Managing Director at United Bank of India. “’We are not going for fresh recruitment and only replacing those who have retired. In the last one and half years we have reduced staff strength by close to 700-800.”

Notably, United Bank of India was one of the first public sector banks to be subject to the Reserve Bank of India’s prompt corrective action (PCA), way back in 2014. The Kolkata-based lender reported a net loss of Rs 1,238 crore in September-December 2013, and gross NPA exceeded 10 per cent. By March 2015, PCA was partially lifted as the banks posted consecutive profits in several quarters. The only restriction which remained pertained to branch expansion. Earlier, the bank was not allowed to give loans more than Rs 10 crore to a single borrower. 

Now the bank is once again passing through a rough phase, as its gross NPAs have swelled to 18.80 per cent gross advances and net NPAs rose to 11.63 per cent of net advances in the quarter ended September 2017. The bank had posted a net loss of Rs 345 crore in the quarter. Now, it is only allowed to provide loans to investment-grade rated assets. 

As a conscious decision, the bank is focusing on retail and MSME lending, while reducing exposure to corporate lending, which accounts for 33 per cent of its loan book. 

Notably, the bank has an exposure of Rs 2,300 crore to companies admitted in the National Company Law Tribunal (NCLT) on RBI’s first and second lists of defaulters. The bank is looking to raise about Rs 1000 crore through QIP.