The Hindu Business Line : UCO Bank to sell off Rs 500-cr bad loans

Chennai, Aug. 19 UCO Bank, which is sitting on an Rs 1,285-crore pile of non-performing assets, will put up about Rs 500 crore of the stressed assets next month for bidding by various asset reconstruction companies (ARCs).

Stressing that the bank would sell the loans only if it got a fair price, the bank’s Chairman and Managing Director, Mr S.K. Goel, told Business Line here on Friday that there would be no let-up in efforts to effect recoveries . He said that two General Managers and about 300 of the bank’s staff had been put on the task of making recoveries.

About Rs 300 crore of the bad loan the bank has on its books today were old agricultural bad loans that have got reclassified as NPAs, after the two-year moratorium from 2004-05. Some NPAs also resulted from fraudulent housing loans.

All the other NPAs are fully backed by securities. The bank has 48 accounts of ‘big ticket’ (over Rs 5 crore) NPAs amounting to a little over Rs 500 crore.

Would the ARCs pay a good price? Mr Goel said that ARCs tend to pay more for those accounts in which the bank was the leader in the lending syndicate. “They will pay more for those loans that will put them in the driver’s seat (for consolidating the loans and negotiating recoveries),” he said.

Earlier the ARCs were themselves inexperienced and being conservative, paid very less. Now, having gained experience, they have realised that it was not so difficult to sell the stressed assets, and hence were willing to pay more, Mr Goel added.

Admitting that the bank’s profits (Rs 316 crore in 2006-07) were not commensurate with its size (Rs 1,12,331 crore), Mr Goel said that a part of the problem was that the bank had lent at fixed rates when the interest rates happened to be low.

As a result, the bank’s average yield on advances was only 9 per cent. Also because the CASA (current account savings account) component of the deposits was only 28 per cent, the average cost of funds was also as high as 6.7 per cent.

These problems would be remedied this year, Mr Goel said. A vigorous campaign is under way to raise CASA. On the other hand, old loans are getting paid back and fresh loans are priced higher.

With this, Mr Goel expects UCO Bank’s net interest margin to reach 3 per cent from 2.42 per cent as at March 2007.

More Stories on : Non-Performing Assets | Securitisation | Public Sector Banks

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