With global slowdown affecting the country’s economy, MD and CEO, United Bank of India (UBI) Ashok Kumar Pradhan suggests the government may look at proactive measures to kick-start stalled projects worth over Rs 5 lakh crore.
In an interview to Hemant Kumar Rout, he also speaks about the plans for amalgamation of PNB, OBC and UBI to create the country’s second-largest lender.
The banking sector is experiencing the worst time. After demonetisation, it is now global slowdown. How much has it impacted?
The credit growth till the October quarter was around 8.8 per cent whereas it was around 14.42 per cent in the previous corresponding period.
If the credit growth has come down so low, one can imagine how banks have been impacted. The business has come down by 45 per cent.
The GDP has also come down to 5.8 per cent in Q1. Though bankers are willing to give loans to projects, there are not many new projects.
Whatever sanctions are happening in MSMEs and small ticket loans, those are unable to absorb the deposits that are being mobilised. Some corrective actions are immediately needed.
What corrective measures will you suggest to come out of the crisis?
As a banker, I would suggest the government make all stalled projects operational like it has taken for the real estate sector with the announcement of Alternative Investment Fund (AIF).
About Rs 5 lakh crore has been stuck in road, power and port projects. If the power projects becomes operational, people will not only get employment, the health of banking industry will be much better.
The projects are left halfway due to arbitration proceedings because of which funds are not available.
The government should pitch in by ensuring that arbitration is avoided and legal hurdles are taken care of so that the money blocked in projects are released quickly. This will have a multiplier effect.
As the government is trying hard to bring the economy on track, do you see any turnaround in future?
Such a situation will continue for next two to three quarters.
The government has taken some important steps and it will have positive impact if the actions on the ground happen quickly.
Similar, sectoral measures need to be taken so that consumption expenditure can be increased. Demand is an issue today, not supply.
Despite efforts the exports are not picking up. Contribution of manufacturing to the GDP has been coming down.
Investment cycle has not changed. Perhaps because we change the laws too often and the enforcement agencies do not distinguish between a genuine entrepreneur and a fraudster.
In many cases, projects delayed due to lack of clearances that has given rise to NPAs in banks besides arbitration proceedings.
What is the way out?
Can we think of creating an eco-system where investors would be allowed to invest money with a declaration?
Stringent action will be taken only if their declarations are found to be incorrect on verification. The initial delays in clearances can then be avoided.
What is the NPA of your bank? How has been the pace of recovery?
Our gross NPA was around 24 per cent (Rs 16,000 crore) till last fiscal which was brought down to 16 per cent (Rs 12,000 crore) till the last quarter.
It will come down to eight to nine per cent (Rs 8,000 crore) by the end of this financial year. The NPA number would have been much better had the resolution of large industries like Bhusan Power and Steel Ltd and Alok Industries, to which UBI has an exposure of about Rs 1,600 crore, happened under Insolvency and Bankruptcy Code framework. We have Rs 6,000 crore money involved in the NCLT process in various accounts. We hope at least 50 per cent will be resolved during this fiscal.
Despite slowdown, UBI is aspiring for a profit of about Rs 800 crore this fiscal.
Along with the NPA recovery, we are trying to increase our business level. We are disbursing more loans and that is giving us more interest income.
We have made a profit of around Rs 230 crore in last two quarters and hope to add at least Rs 500 crore more in Q3 and Q4. Total business target for the fiscal is about Rs 2.2 lakh crore.
Will the merger UBI, PNB and OBC have any impact on jobs?
Not at all. All three banks will be equal partners. While the current business volume of the three banks is about Rs 18 lakh crore, we have a target to make it Rs 20 lakh crore by March-end.
Since PNB is the anchor bank, the merged entity will function as PNB till the new name and logo are decided.
However, the interest of employees is fully protected. Their promotional options are also open. Though most of the executives will be from PNB, there should not be any disparity among them.