Union Bank of India continues to battle with asset quality issues. The bank has a sizable for restructuring. According to D Sarkar, Chairman & Managing Director, Union Bank of India, the estimated restructuring pipeline would be Rs 2,200 crore up to June, 2013 across all sectors. However, most of the stress on restructured loans is likely to come from sectors like steel, infra, construction companies and EPC (engineering, procurement and construction).
Restructuring means relaxation of original terms and condition of loan agreement between lenders and borrowers. This happens when any borrowing company find itself under financial stress and likely to default in repayments.
Below is the verbatim trasncript of his interview to CNBC-TV18
Q: You have had a significant amount of outstanding restructured book of around Rs 11000 crore. Have you seen any slippages coming from that book in this quarter?
A: Certainly some slippage. I have already given the percentage. We are not only the commercial bankers, we are a social banker also. As I indicated in earlier forum also somewhere we feel that the restructure is needed for the benefit of the corporates. For the benefit of the industry we are doing it.
In most of the cases economic factors that are prevailing in the country that is one of the responsible reasons. Suppose, infra has slowed down a little still there is coal linkage issue or may be the ore linkage issue. So, these things are coming in between.
If it is really addressed we don’t really feel it will give pain in the future, but the policy of the bank is always giving a hand to the industry and we will be continuing it. I did not see any big threat about it when we were going for restructure but we have to live with it there is no other way.
Q: What is the restructuring pipeline looking like in the next quarter? This quarter although you restructured around Rs 1400 crore of accounts. Going forward is there any restructuring pipeline?
A: Up to June 2013 we have estimated that roughly it is coming around Rs 2200 across of all the sectors. Mostly coming may be some steel, infra, construction companies also – basically the engineering, procurement and construction (EPC) contractors.
Q: Coming back to the growth and the margins front, you said in your statement that margins could come under pressure. How much could margins go lower from here?
A: Earlier also I indicated that we tried to and we endeavour to maintain at 3 percent. At the same time we have to trade off between growth as well as the margin. What I personally feel that whenever we are trying to pass on any benefits to the borrowers certainly, we are little bit compromising to reduce the base rate.
Similarly high cost deposit we have already said – but still the cost of deposit is not falling down as the desired way. Considering two factors consecutively we are trading off that may be we can go for little bit more volume to increase the advances if provided. We are reducing the rate especially the base rate and in some of the selective sectors we have already done that. We think that okay 5 basis points, 10 basis points we have to compromise in NIM, but I think that is for the benefit of the consumers in general.