Union Bank working on SDRs for two mid-size accounts

Bank's focus is on those accounts to which only one or two lenders have exposure

In a bid to recover dues from stressed corporate accounts, Union Bank of India is focusing on strategic debt restructuring (SDR) for mid-size accounts to which only one or two lenders have exposure.

The Mumbai-based public sector bank is currently working on two such cases, according to sources.

The bank is also preparing a list of mid-size corporates for SDRs. One of the cases being discussed is from the steel sector, said a senior executive with the bank.

Mid-size loans are those accounts with exposure of Rs 100-200 crore and a turnover of Rs 500 crore. Union Bank's size of mid and corporate loan book was Rs 1,10,471 crore in March 2015 -- up 3.7 per cent from Rs 1,16,175 crore in March 2014.

 

While lenders have already begun discussions for SDR action in big three corporate cases -- Electrosteel, Jyoti Structures and Monnet -- the process is often time-consuming due to the presence of a large number of creditors.

Under the SDR norms prescribed in June, the Reserve Bank of India (RBI) allows banks to hold 51 per cent or more of the equity after debt-for-share conversion. Under this, banks will have to closely monitor the performance of the company and appoint professional management to run it. At the same time, the banks themselves should try and sell their stake "as soon as possible".

The Union Bank executive said these mid-size companies are viable units facing liquidity challenges. In many units, existing promoters are overstretched to bring any more resources to the table.

Most of promoters run a clutch of businesses so even after exiting one company, they are able to focus on their other ventures.

Despite the challenging environment, the bank has been able to curtail the level of NPA by restricting slippages and increasing recoveries through regular follow-ups. During FY15, the bank made cash recovery of Rs 1,537 crore in addition to upgradation of accounts to the tune of Rs 592 crore.

Gross NPAs as a ratio of gross advances stood at 5.53 per cent (Rs 14,144 crore) as of June 2015 against 4.27 per cent (Rs 10,232 crore) as of June 2014. Net NPA to net advances ratio stood at 3.08 per cent against 2.46 per cent.

Provision coverage ratio stood at 58.05 per cent in June 2015 compared with 58.92 per cent in the year-ago period.

The bank's standard restructured advances were Rs 14,125 crore in June 2015. Out of Rs 14,144 crore worth of gross NPAs, recast advances are to the tune of Rs 5,002 crore.