The Hindu Business Line : Union Bank chalks out revamp package for SMEs

Mr M.V. Nair (left), Chairman and Managing Director, Union Bank of India, and Mr T.Y. Prabhu, Executive Director, at a press conference in Mumbai on Thursday.

Our Bureau

Mumbai, Dec. 11

State-owned Union Bank of India has decided to throw a lifeline to distressed micro, small and medium enterprises (MSMEs) facing the brunt of the domestic and global economic slowdown.

The bank has drawn up a restructuring package for troubled MSMEs whereby they can avail themselves of ad hoc facilities to tide over temporary funding mismatches, enjoy longer holding period for inventories, convert working capital loans into working capital term loans, and get term loans re-phased.

The bank, which had an outstanding MSME portfolio of Rs 13,884 crore as of September 30, 2008, is pro-actively reaching out to its MSME customers, who are on the brink, with the restructuring package so that they do not fail.

By doing so, the bank is trying to contain the non-performing loan problem which could otherwise arise. As of September 30, 2008, MSME advances accounted for 16.24 per cent of the total advances (Rs 85,506 crore)

The trigger for the bank to come up with a restructuring package is a recent study undertaken by the bank on the problems being faced by its MSME customers.

“We undertook a study of the problems being encountered by our MSME customers in the wake of the economic slowdown. Following the study, we have put in place a restructuring policy for our MSME customers. We want to reach out to our customers. We cannot allow them to fail,” said Mr M.V. Nair, Chairman and Managing Director, Union Bank of India, after making an announcement regarding the setting up of 100 specialised business banking branches, which will be dedicated to the MSME sector.

The bank, according to Mr T.K. Sharma, General Manager, has identified 10 SME clusters, including Ludhiana (hosiery), Mandi Govindgarh (steel re-rolling), Jamshedpur and Pune (auto components), Tirupur (knitwear), Mumbai (diamond), Surat (textiles), Varanasi (carpet), etc., where units financed by the bank would be taken up for restructuring.

Elaborating on the establishment of branches dedicated to MSME customers, Mr Nair pointed out that customers with limits of up to Rs 35 crore or having a turnover of less than Rs 1,000 crore can approach them for finance. These branches, which will be manned by staff with requisite skills and attitude to support entrepreneurs, would ensure a quick turnaround time (decisions on loan applications will be conveyed to customers within 14 days).

Capital Raising Plans

Union Bank of India has headroom to raise up to Rs 3,500 crore via Tier-II bonds and innovative perpetual debt instruments, according to Mr Nair. “We will wait for appropriate market conditions to raise funds,” he said.

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