United Bank of India wants RBI to lift cap on lending

The bank also seeks permission to resume recruitment of staff and officers at branches and key units

After experiencing a troubled 18 months, Kolkata-based United Bank of India (UBI) has seen a rating upgrade for its Tier-II bonds. The public sector bank, headed by new Chief Executive Officer P Srinivas, has approached the Reserve Bank of India (RBI) with a plea for phased removal of cap on lending. The bank has also sought permission to resume recruitment of staff and officers at branches and key units.

According to Srinivas, the bank's asset quality has stabilised. The bank expects to get good amount of credit.

Srinivas took charge in the last week of December. The position had been vacant for about 10 months, after chairman and managing director Archana Bhargava resigned in February 2014. Two executive directors were running operations till the government made the new appointment. ICRA has upgraded the rating for the bank's Lower Tier-II bonds from 'A-' to 'A+'. The outlook on the long-term rating is positive.

The revision in ratings reflects the easing of concerns about asset-quality deterioration and an improvement in the capital indictors, ICRA said.

The control on slippages (accounts becoming non-performing assets or NPA) and recoveries has enabled the bank to reduce its gross NPA, which declined to Rs 7,075 crore (10.78 per cent of advances) in September, against Rs 8,546 crore (10.82 per cent of advances) in December 2013.

According to Srinivas, while NPAs have declined in absolute terms, they remain high in percentage terms, as the loan book has shrunk. The credit portfolio shrank 24 per cent year-on-year to Rs 62,396 crore in September-end.

In December 2013, RBI restrained the bank from advancing loans above Rs 10 crore to any single borrower.

  The central bank has eased some restrictions on fresh lending. However, the overall loan book is expected to reduce further over the next few quarters, considering the focus on NPA recovery and incremental lending to the retail segment.

The bank management has taken the steps to further reduce its pool of stressed accounts. A continued improvement in the asset quality would improve earnings further trigger an improvement in the credit ratings, ICRA said.

Referring to recruitment curb, Srinivas said that about 1, 000 employees were to retire in 2015-16. It takes six-eight months to complete the recruitment process. If the bank starts work now, it would be in a position to have people in the early part of the next the financial year, he added.