The Kolkata headquartered United Bank of India (UBI) with a strong presence in the eastern region of the country is saddled with Rs 15,000 crore non-performing assets. The bank’s MD & CEO Ashok Kumar Pradhan hopes to recover around Rs 5,000 crore out of that by the end of the financial year. He speaks on issues surrounding stressed assets, regulation and the bank’s own exposure to IL&FS in a chat with TNIE’s Hemant Kumar Rout.
Banking sector is faced with cleaning up a mammoth Rs 10 lakh crore worth of NPAs on their books. Why are we faced with this problem?
Had bankers not been partners to the economic growth, India would not have recorded a growth of eight or nine per cent... Growth receded because some did not do well, but the issues are not entirely related to banking. Primarily, it is regulatory matters that is responsible for the scenario.
Apart from the intent of promoters, government agencies, which are supposed to regulate things, somewhere failed to play their roles... I am not saying that the bankers have not done mistakes. But, I am sorry for opinion-makers who only blame bankers without looking into the context and interlinked issues responsible.
Why do you say that regulatory bodies are responsible for the crisis?
Let’s look at the power industry, which is facing major problem on account of Power Purchase Agreements (PPA) and Fuel Supply Arrangements (FSA). These are two essentially regulatory issues... PPA and FSA are interrelated as FSA cannot be in place unless there is PPA. Now, the government is tweaking the norm. If it comes out with a clear-cut policy that will ensure FSA irrespective of PPA, or if it can arrange fuel supply, power producers will perform better and repay.
There are 34 large power units, where the bankers are stuck with about Rs 1,74,000 crore of exposure and they are all under stress. If the regulatory issues can be addressed, all those units will come out of crisis.
Similarly, bankers funded road projects. Even if 90 per cent work is over, several road projects were delayed due to unavailability of land. A developer cannot collect toll until 100 per cent of the work is complete. Government agencies, which could have played their roles in getting clearances on time, did not do so.
Be it the government, promoter or the banker, every agency has played a role in deterioration of things. What is the bank doing to get out of RBI’s Prompt Corrective Action (PCA) framework?
I am looking for a recovery of about Rs 3,000 crore from the National Company Law Tribunal (NCLT) window and another Rs 2,000 crore through regular efforts like one-time settlement, asset sale and technical write-offs by end of the financial year. Our net NPA must be less than nine per cent, and hopefully by March 2019, we will be out of the PCA framework.
What is UBI’s exposure to IL&FS Ltd and how are you dealing with the crisis?
The IL&FS saga is an outcome of the poor vision of rating agencies, which are entirely responsible for it. It is unfortunate that they could not visualise the cash flow to the IL&FS group... This is why bankers were caught unaware and are in trouble. There will some haircut, but at the end, things will improve.
Since we felt that the exposure was a little high compared to the size of balance sheet, we have slowed down lending to NBFCs. From a five-digit figure, the total exposure to NBFCs has come down to four-digits.