Loans to Rolta India and Lavasa will be among two corporate accounts that Union Bank of India (UBI) has shortlisted to be referred to the NCLT. The bank may have to refer loans of Rs 7,914 crore, including those of Lavasa and Rolta India, to National Company Law Tribunal (NCLT) to comply with the Reserve Bank of India’s February 12, 2018, circular.

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Of these, Rs 4,325 crore of loans are from the power sector. Through the circular, RBI had asked all banks to refer cases of Rs 2,000 crore and above to NCLT if the lenders do not have a resolution plan in place in six months starting from March 1, 2018.

Saddled with gross NPAs of Rs 50,973 crore, about 72% of which are from the corporate book, Rajkiran Rai, chairman and managing director of the bank, is using multi-pronged strategy to solve many of the legacy issues associated with the non-performing assets. A strong believer in bouncing back, Rai is confident of cleaning up the mess and bringing the bank back to profitability.

A senior UBI official said, “We are not the lead bank in any of these cases, so we will not refer any cases directly. We will wait for the lead bank to act in each of the cases. Even in the power sector loans the cases are referred to the Supreme court which will decide the future course of action.”

The bank has already referred Rs 17,261 crore of loans to NCLT with Rs 11,375 crore of provisions on the loans as part of its regular recovery efforts.

“The bank is focusing on recoveries with one-time settlements, engaging with customers to regularise their accounts, so that the accounts can be upgraded,” the official said.

In the first two months of the second quarter - July and August - the bank saw a reduction of bad loans of Rs 1,373 crore, recoveries of Rs 840 crore and upgradation of Rs 230 crore.

The bank also wrote off Rs 303 crore worth of loans during this period. It has recovered Rs 1,050 crore from two NCLT referred accounts - Bhushan Steel and Electrosteel. It has set up a separate team to monitor accounts having aggregate exposure of Rs 100 crore and above. If there is a sudden spurt in advances at the branches, the head office scrutinises the accounts.

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Early warning system resolution teams are appointed at all the 63 regional offices of the bank resolve accounts, especially of the micro, small and medium enterprises.

The bank also plans to beef up its capital position by maintaining a buffer of 1% above the regulatory requirement. Total capital required in 2018-19 is about Rs 7,400 crore. In 2017-18 the bank raised equity of Rs 6,524 crore through a qualified institutional placement. The lender is trying to deploy its low-cost CASA deposits effectively.

Source: DNA Money