The Hindu Business Line : UCO Bank to restrict lending to good margins

THERE is no dearth of credit. In the first nine months of the current year, UCO Bank's credit portfolio grew 46 per cent against the industry average of 30 per cent. Having, thus, built sufficient momentum in advances, the bank today wants to take only those lending opportunities where the spreads are good.

The full year growth in advances may be "restricted" to 35 per cent, the bank's Executive Director, Mr S.A. Bhat, told Business Line on Tuesday. (Mr Bhat took over as the ED of the bank this month.)

The bank is likely to end the current year with a loan book of around Rs 40,000 crore, up from Rs 33,000 crore last year. Total business for the bank is expected to rise to Rs 95,000 crore, from Rs 88,000 crore last year, Mr Bhat said.

But why restrict advances growth? "Resources," Mr Bhat replied, noting that tightly-priced big ticket loans do not allow for much spreads. UCO Bank's average cost of funds works out to 5.4 per cent, a good 3 per cent below its average yield on advances.

Capital adequacy as at December-end was 10.25 per cent of risk weighted assets, and would have grown a bit after the Rs 250 crore Tier-II issue (long-term subordinated bonds) in January.

Coming out with a follow-on public issue is not a good option for the bank, which has Rs 800 crore of paid-up capital.

Mr Bhat said that the bank was considering both 15-year bonds and perpetual bonds to bolster its capital base. He said that the bank was confident of meeting the target for recovering NPAs worth about Rs 270 crore, having already achieved Rs 213 crore. But recoveries may not significantly add to the bottom-line, because fresh slippage has been only a shade under recoveries.

Mr Bhat also feels that the bank may not need to make any provision for depreciation of securities in the current quarter, if there is no change in interest rates.

Today, Mr Bhat launched the bank's `retail sales force' in Chennai. The fleet of bank employees forming part of the force will aggressively sell the bank's retail products.

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