REI Agro is NPA since Mar '14, bullish on MSME segment: UBI

RBI has asked banks to declare REI Agro as fraud company. Deepak Narang, ED, United Bank of India spoke to CNBC TV18 what it means for the bank which has an exposure of Rs 200 crore to REI Agro.

Below is the transcript of Deepak Narang’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Anuj: I am assuming this is a big relief but if you could tell us what are the conditions of this relaxation and how much credit can you disburse?A: It is a welcome news by Reserve Bank of India (RBI) relaxing these conditions now. There are no restrictions as such, we can lend as per the policy formulated by the board. All committees can sanction credit proposals, it is not linked to recovery; no restrictions as such except that we have to maintain to Capital to Risk Weighted Assets Ratio (CRAR) of 9.5 percent and Credit Deposit Ratio (CDR) should not exceed 70 percent.Ekta: What does it currently stand at for you?A: It is about 62 percent. So, we need to push credit and with economy picking up we have a good chance of picking up good proposals and increasing income and have a positive spin-off effect on that.

Ekta: Your capital adequacy ratio currently stands at?A: It is more than 10 percent, 10.28 percent. We should not fall below 9.5 percent so we have some headroom to grow. However, we would need again some capital and we are looking at that so that we can grow.Ekta: What would your credit strategy be now because one of the things that were mentioned was that because you were prudent in terms of lending you managed to focus on recoveries quite strongly? Would you now be more prudent in terms of your credit growth and whom you would possibly be lending to and if so what would be the strategy that you would entail?A: Recovery focus would continue because we need to recover; that goes without saying. However, at the same time credit has to pick up. Now, when economy picks up, certain accounts would turnaround, certain accounts would need additional credit; we need to support that, retail we need to push further, MSME we are making a hub of MSME and sanctioning would be done in a centralised way so that credit quality is taken care of. My MD is very bullish about growth in MSME and hopefully we would do a good job and MSME because returns are good. The charge is not like corporates because big corporates we get base rate, not more than base rate. So that is a positive sign. MSME and retail we would focus apart from medium segment.Ekta: I just wanted to ask you about two accounts in particular, there was a news article which indicated today that the RBI has detected fraud in REI Agro and there is a CBI probe likely, do you have exposure to REI Agro, if so how much and if you could confirm this news for us and what the status is?A: RBI has given such instructions and about CBI I cannot say because lead bank has take a call on that and UCO Bank is the lead. I think the decision was taken that if such a thing happens lead bank should take a call and do the needful.Ekta: What are the instructions which have been given by the RBI to the consortium of lenders to REI Agro?A: What news you say I don’t deny that news what has come that the RBI has asked banks to declare it as fraud. All bankers will sit together and lead bank should take things forward in whichever way it has to be done because most of the credit is passed on to the lead bank and they disburse loan and they monitor that. Let us see the situation prevailing at each and every bank.Anuj: What is your own exposure and would this be a non-performing asset (NPA) now?A: It is an NPA since March. It is around Rs 200 crore.Anuj: Will you write it off now?A: Why write it off, there are some assets. We have been making provisions since March 2014 so we will see how much provision we have to make this time also looking through the assets, look through the audit report and all these things. 

Ekta: I wanted to ask you about Pipavav Shipyard. We do understand that you have exposure to the company and the CDR is expected to be approved today? A: We are a part of that, we have exposure of about Rs 200 crore. If CDR happens it will be good because it has the potential. It is a good port, facilities are there, defence orders they maybe getting so every possibility of account turning around with little bit of support and new investor coming in. Ekta: You are expecting that to take place today? A: Yes.