No requests from any SEB for loan restructuring: UCO Bank

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Shares of UCO Bank  crashed nearly 10% yesterday, after the bank announced it has agreed to reschedule cash-strapped Uttar Haryana Bijli Vitran Nigam's (UHBVN) payment of its outstanding term loan of Rs 887 crore from 3 to 10 years.

Speaking to CNBC-TV18, Arun Kaul, Chairman of UCO Bank said, UHBVN continues to be a standard asset for the lender. "UHBVN has not requested for any reduction in rates," he informed.

Kaul also said that the bank has not received any requests for restructuring from other state electricity boards. "We have cleaned up our balance sheet significantly and asset quality will be stable going forward," he added.

However, he acknowledges steel and textile accounts remain under some pressure. "I think banks will not help Kingfisher unless all debt obligations are met," he felt on the debt-ridden airliner. 

Below is an edited transcript of the interview. Also watch the accompanying video.

Q: The market was a bit nervous because it's been very frightful about these problems of sticky assets particularly in energy sectors like state energy, utilities. What is the situation is with Uttar Haryana Bijli Vitran Nigam (UHBVN)?

A: Uttar Haryana Bijli Vitran Nigam (UHBVN) has been funded by the various banks. The total loan outstanding is about Rs 7,500 crore of which UCO Bank has given five sixth of the loans with a repayment up to five years.
The company has been regularly servicing these debts and they have been paying the interest installment regularly. The present outstanding is Rs 860 crore. Since the company is has been apparently facing crisis, they have requested the banks to reschedule the term loan. The only request is in terms of rescheduling the term loan, they have not asked for interest concession. So we have agreed the request and extended the term loan repayment. That's only thing we have done, there is no reduction in the rate of interest and no other sacrifice. SoUHBVN continues to be is a standard asset even today.

Q: When will the repayments start and are you giving them a moratorium for three years now?

A: Yes, the moratorium of three years is because the company has little problem. The state government has decided to review the tariffs; they will be periodically reviving the tariffs. The State government has also agreed to provide them the subsidy and a lot of the steps have been taken to ensure the long-term viability of the utility. With regard to this we have agreed for restructuring the term loan on UHBVN's request.

Q: How sure are you that this liquidity problem will not persist and maybe in a couple of years' time they will come and ask you for more concessions or further restructuring or delay in payments?

A:  Our bankers have been meeting regularly, four meetings in the last two months have taken place, and another meeting will take place shortly. We have been reviving this on a continuous basis. We would closely monitor this and would also talk to the state government on this. We are hopeful that the various steps taken by the state government would ensure long-term viability of the company.

Q: What is your total exposure to power utilities or state power utilities and are you experiencing similar requests?

A: I's approximately Rs 6,000-7,000 crore. We have not received any request from other electricity boards as yet.

Q5: How likely is it that some of these utilities will eventually turn out to be assets?

A: As on date these are all standard assets servicing regularly. Some of the utilities are facing the problem, they are taking steps to assure the long-term viabilities, and tariffs revision is being done regularly. The state government provides support by ways of subsidies, which were not provided till now all this, would help the utilities to turn around, start performing better and meet all the liabilities.

Q: What is going on with Kingfisher where you have some exposure as well, where have stock reached?

A: Kingfisher is also debated among the bankers and we are hopeful that they would service the debt and keep the account standard.

Q: Have you got any assurances from the promoters on that count or is it just a request from the banks that first the payment needs to be made, dues should be cleared and then restructuring should be considered?

A: Banks are quite clear; they would not entertainment any request until the dues are cleared. I think this bank has made it clear to the promoter in the last meeting.

Q: So when is the next meeting, when you will take a final decision on this?

A: It might be conducted shortly.

Q: What is the general situation with regard to asset quality right now in terms of various sectors because that's the fear on which many of the public sector banks have been derated?

A: Banks are proxy to the economy, if the economy is not doing well then certainly it will lead to the problems for the banks and that's why we have seen some slippages. As UCO Bank is concerned we have started the cleaning operation last year, we have substantially cleaned up the balance sheet so we are hopeful that we will be able to improve the asset quality going forward.

Q: Where have you seen the slippages, in terms of which sectors where some stress is cropping up?
 
A: Since UCO Bank is predominantly concerned with the corporate credit. The biggest slippage is for the corporate credit only which we have declared and initiated the process for recovery and it has been good. We have noticed that some sectors are under stress particularly steel and textile and few other sectors but gradually we are taking care of all that and I am sure as far as UCO Bank is concerned we would not have problem with respect to the asset quality going forward, we should be able to prove upon this.