Union Bank hopes to maintain NPA below 3%

Union Bank of India, which has been battling with asset quality issues, is fiercely focusing on reducing its slippages and hopes to contain it non-performing assets (NPA) below 3 percent in current quarter, CMD, Debabrata Sarkar told CNBC-TV18.

The state-owned banks had reported 2.98 percent gross NPA in March quarter. Sarkar however stressed that he was focusing more on reducing absolute figure both in the gross NPA and net NPA as percentage can increase if there is any growth in loans.

“I am hopeful that whatever we could maintain in the last three quarters at least in the slippage level, we will be hovering in that percentage only,” Sarkar added.

Mainly on account of discoms restructured loans, the bank may have to make additional provisions of Rs 35-Rs 40 crore, Sarkar said. The bank expects total restructured loans in the current quarter to come at around Rs 2,200 crore as indicated earlier. 

Below is the verbatim transcript of Sarkar’s interview

Q: First some numbers, your slippages or fresh bad loans were reducing marginally in the last couple of quarters – how do you see them fairing in the current quarter?

A: I am hopeful that whatever we could maintain in the last three quarters at least in the slippage level, we will be hovering in that percentage only. That is the present situation. It is really a fire fighting situation. Everyday morning and evening I am taking positions of my slippage as well as the positions. I am hopeful that we will be able to maintain that trend of reduction in the gross non performing assets.

Q: I am asking you this question more because of rupee depreciation – let me come to the gross non performing loans and the net non performing assets – they fell very sharply in the Q4, how are they likely to be in this quarter – have you set any targets for yourself in terms of NPA ratios?

A: We want to reduce it sequentially. What is the best possible level we can do? 2.98 percent was the gross NPA in March 2013 so; certainly I am trying to reduce it. I am not looking at percentage specifically; I am just looking at the absolute figure because percentage may increase if we increase the loan growth. I am trying to reduce absolute figures of both, the gross NPA and net NPA. I think whatever percentage comes there is a derivative to me. I am not targeting any percentage but as far as possible I will maintain it below 3 percent and that also below March level, which is my target.

Q: We also understand that Uttar Pradesh, Haryana, Tamil Nadu and Rajasthan discom bail out packages are almost ready- can you tell us about what your exposure is?

A: I cannot give separate number, because we have already done Rajasthan and UP. But overall exposure in State Electricity Board (SEB) could be around Rs 11,500 to Rs 12,000 crore. But whatever the indication we have given earlier about the total restructuring, total restructure would be around Rs 2,200 in this quarter.

Q: The reason I ask is because the provisioning on restructured assets has gone up and for these discoms in particular you may have to provide more because of the possibility of a loss in the net present value (NPV) of the loans going forward. In general how much will your provisioning increase in the next couple of quarters?

A: Roughly we have calculated maybe around Rs 35 to Rs 45 crore that is additional provisions we are thinking to do taking all these into considerations. So, let us see. I have made rough calculations, another Rs 35 to Rs 45 crore maybe the additional provisions we are planning for, in comparison of last year.

Q: That Rs 35-45 crore is on restructured assets or only on power discoms?

A: Altogether.

Q: Are you still seeing or witnessing a fall in bulk deposits and how will your margins shape up this quarter?

A: We reduced bulk deposits a lot. Whenever we have tried to reduce it, it was more than 16 percent and presently my bulk deposit is below 9 percent. But one thing is a concern that okay cost of deposit is really not reduced so therefore margin whatever we could maintain it, we can hover around 2.9 percent or little bit above that, 2-3 basis point here and there. But it is very difficult to really increase from that level because cost of deposits it is not reducing. Bulk deposit we reduced, maybe we are getting little bit benefit but I think this benefit will come slowly because some of the reprising is being done and that also at little bit lower level. I am hopeful that net interest margin (NIM) would be around 2.9 percent.