Kolkata-based public sector bank United Bank of India (UBI) hopes to initiate a capital restructuring plan by the end of this financial year, before going for an initial public offering (IPO). The bank is planning to sell non-performing assets (NPAs) worth about Rs 200 crore to an asset reconstruction company. S C Gupta, the newly appointed chairman and managing director of the bank, said rising NPAs are a cause for concern for the whole industry, in an interview with Namrata Acharya. Excerpts:
Given the ongoing financial crisis, what is your outlook for the banking industry?
Despite the slowdown in the economy, the banking industry has shown resilience and has done reasonably well. It is only the mark-to-market provisions, which has resulted in the reduction in profit for banks. The busy season has started, and I think with the Reserve Bank of India (RBI) relaxing provisioning norms for real estate lending, banks should lend more.
Are rising NPAs a concern for the banking industry?
Yes, NPAs could be on the rise. It is a cause for concern. The economic slowdown could delay payment to small and medium enterprises (SMEs). At UBI, we are coming out with a policy to restructure accounts, especially for SMEs and small-scale units, whereby accounts, which are viable, have a good track record and are performing well, could be brought back to health.
What specific measures are you taking for NPA management?
For NPA management, we are organising recovery camps in rural areas, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act is also being used. We could also think of selling some assets. We will create a portfolio, which may be in the range of Rs 200-300 crore. We are doing the valuation and grouping of accounts.
What are the current NPA levels?
At present, gross NPA is 3.8 per cent and net NPA will be 2 per cent. By March, we should be able to bring down NPA levels by half a per cent in both categories.
Do you have any fund-raising plans in the coming months?
We had discussions at the board meeting regarding fund-raising and capital restructuring. We also planned for an initial public offering, but since the market is not positive, we did not go for it. At present, our total paid-up capital is close to Rs 1,532 crore. Now, we will have to decide what to do with the balance if we bring the equity to Rs 300-400crore. Whether we will return it to the government and at what rate. We will be working with consultants on this. Capital restructuring may be done this year.
Is IPO an option in this financial year?
Market has to pick up. Things should look up by at least next March. If we have 6-7 per cent inflation by March, the stock exchange will also pick up. Even for public-sector banks, approaching the market should be an opportunity, especially when not many IPOs are coming. We will wait and watch.
What would be your focus areas?
We should be giving more loans to sectors such as agriculture, SMEs and housing.
When do you expect to have total business cross Rs 1 lakh crore mark?
This financial year, our target for deposits growth is 17 per cent, and in advances, we want to grow by 18 per cent. Our total business is close to Rs 75,000 crore now. Ideally, we should cross Rs 1 lakh crore-mark by March 2009. However, we are growing with caution.
Has the recent liquidity measures helped UBI?
We are comfortable in terms of liquidity. As of now, we do not require fund infusion, because windows are available. We have good deposits. We have not used the liquidity adjustment facility (LAF) and repo windows of the RBI. If call rates are any indication of liquidity, they had earlier shot up to as high as 21-22 per cent. Now they are stable.
