Merger of branches, cutting down zonal/circle offices part of turnaround strategy
Kolkata, August 13:
Having faced losses for seven consecutive quarters, UCO Bank is working on a turnaround strategy to improve its asset quality and narrow down its losses.
According to Ravi Kishan Takkar, MD and CEO, the strategy, which has already been submitted to the Finance Ministry, includes getting back to profits in two years’ time.
The turnaround plan also envisages branch rationalisation, including merger of unprofitable branches or merging multiple branches in the same location and bringing down the number of zonal and circle offices.
In FY17, the bank brought down the number of circle offices to eight (from 10) and zonal offices to 42 (from 50). It also merged 14 branches in metro centres.
“Wherever it is viable we are going for rationalisation of branches to bring down costs and improve efficiency,” he said.
Growth with caution
The bank will focus on growing its business, albeit cautiously, in sectors such as retail, MSME and agriculture.
“We are looking at a credit growth of 5-6 per cent this fiscal, primarily from the retail, MSME and agri sectors,” he said. The retail loan book, which was at ₹21,000 crore as on June 30, 2017, would grow by 10-11 per cent this fiscal.
The farm loan waiver announced by some States has affected the repayment culture, thereby, impacting the agri loan portfolio to some extent, he said.
“We have seen an upward trend in NPA in this (agri) sector. This is mainly because farmers are expecting a loan waiver and delaying payments,” he pointed out.
The bank’s agri loan book is close to ₹15,000 crore and the NPA percentage is 16.57in this segment.
The bank will require close to ₹3,000 crore to support its credit growth and provide for NPAs this fiscal.
“It is not conducive for us to go to the capital market at the moment. So, we are looking for support from the government. We have requested them (government) to infuse capital,” he said. The bank might also look at raising capital through Tier-I bonds.
UCO Bank, Takkar said, will focus on bringing down its non-performing assets by focussing on recovery and also selling some stressed assets to asset reconstruction companies (ARCs).
For the quarter ended June 30, the gross non-performing assets grew to 19.87 per cent (17.19 per cent) while net NPAs stood at 10.63 per cent (10.04 per cent).
The bank is looking to sell close to ₹1,000 crore of bad loans to ARCs this year, of which, it has already sold ₹60 crore in Q1. It had sold ₹1,123 crore of bad loans last financial year.
UCO Bank has a total exposure of ₹4,500 crore in nine out of the 12 accounts identified by Reserve Bank of India for resolution under the National Company Law Tribunal (NCLT).
“It is a time-bound process. Even if we can have one or two cases resolved it will set the pace for recovery of corporate bad loans,” he pointed out.
(This article was published on August 13, 2017)
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