"The bank has fixed assets as collateral against the defaulted loans and their value is more than the outstanding loans," Narang said in an interview to CNBC-TV18.
The bank on Tuesday, took legal action against Bilcare, a packaging solutions provide, in order to reduce its non-performing loans. It has recalled the advance made to the company by issuing section 13(2) under Securitisation Act.
UBI has to recover loans worth Rs 51.5 crore from the company. Narang informed that Bilcare had communicated with the bank about this issue, but it is yet to draw up a definite plan on repayment of the loan.
"We have already issued winding up notice to that company because we want them to pay up as there is no reason why they should default with us and they need to pay the liability on the due date," he added.
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Below is the edited transcript of Narang’s interview to CNBC-TV18.
Q: Take us through events as they stand with Bilcare? What actions has the bank specifically initiated against that company?
A: Bilcare had defaulted and we had to declare it as a non-performing asset (NPA) as on March 31. We had no option but to recall that advance and immediately call for issuing section 13(2) under Securitisation Act. We have already issued winding up notice to that company because we want them to pay up as there is no reason why they should default with us and they need to pay the liability on the due date. So, we are not sparing anyone. Not only Bilcare, but other we have taken similar steps with other companies because we want to be aggressive as far as recovery is concerned.
Q: Has there been any communication from the Bilcare management on their ability to either pay or ask for some moratorium? Have they got back to your demands?
A: There was some communication with their managing director, but there is no definite plan, which they have offered to pay our dues. They want to call a lenders’ meet. We need our money so, we need to take what action is necessary. In case they have a plan, they are yet to talk to us about those plans and how they want to pay. If they do not, we are proceeding ahead with our action for recovery.
Q: Do you have any collateral from them or pledged shares or anything that you can liquidate?
A: Yes. We have collateral. We have a charge on the fixed assets and second charge on the current assets. If it winds up as we have already issued a notice to them, then all the securities would be pulled together and the secured creditor will get a preference for repayments. We are secured creditor for the company.
Q: At this point though, what does collateral amount to versus the loans outstanding for Bilcare because as you know even the stock price for Bilcare has suffered quite a bit?
A: Because my collateral are fixed assets, they would not suffer a hit. It is more than what my outstanding is. My outstanding is Rs 51.5 crore but I am fully covered by that charge on collateral which I have as a very first charge on the fixed assets. So, I am fully covered. That is not an issue.
Q: I note that over the last week or so, the bank has initiated legal action on four companies, mostly as ‘willful defaulters’ meaning that they are profitable companies but they are not paying. This reading was like a worrying trend where some of these medium and small companies are actually willfully turning defaulters to banks that have given them loans?
A: These companies take banks lightly. We want to make them realise that banking is a serious business. Once they borrow, they need to pay at the right time. We cannot take a hit. If we have declared these accounts as NPA as on March 31, we have suffered a loss. I have to provide for those NPAs. Why should a company not fulfill its commitment? I have given notice to four of the companies and a publication has already been given in the newspaper about their default.
Another company is Arch Pharmalabs, wherein we have already issued notice and recalled that advance. Even after they make promised that they would pay dues after March, they have not paid. I cannot take these things lightly. I need to be tough. I need to make recoveries. That is my business. If you have a commitment, you must pay at that right date and time.
Q: How is the general asset quality landscape looking? Do you expect much more by way of restructured assets in Q4 and more slippages?
A: No, it is more or less the same trend, which is continuing in Q4. We are seeing a follow out of what we had in Q3 in Q4 too. We are coming to the end of the tunnel. Whatever has happened in Q3 has spilled over to Q4 also. We have restructuring of more or less the same amount, slippages of more or less of similar nature and amount. Thus, real data would come after the audit is complete. What I see is the same trend which was in Q3.