To bring it down from Rs 2,098 crore to Rs 1,500 crore by this fiscal

Priya Nair

Action plan


tighten monitoring policy


s recovery agents at various levels


s up 4 specialised branches for recovery

Mulls selling

NPAs in secondary market

Mumbai, Aug. 6

Union Bank of India has drawn up an action plan to reduce its non-performing assets (NPAs) in the current fiscal.

This includes setting up specialised branches for recovery, stricter monitoring of accounts, targeting defaulters under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act and appointing recovery agents at various levels.

The bank, which currently has a gross NPA level of Rs 2,098 crore, plans to bring it down to Rs 1,500 crore by the end of this fiscal.

"NPA management is going to become difficult day-by-day if we have to retain our net NPA levels at the same levels. There are bound to be slippages as credit is expanding. This is bound to hit net profits," said Mr R.S. Reddy, Executive Director, Union Bank of India.

As on June 30, 2006, the ratio of net NPA to total assets was 1.22 per cent against 2.39 per cent last year. Similarly, the ratio of gross NPAs reduced from 4.94 per cent in June 2005, to 3.55 per cent in June 2006.

While the bank had a cash recovery of Rs 365 crore in 2005-06, it is planning to target the same amount by September 2006, said Mr A.A. Taj, General Manager, Credit Recovery and Legal Services Department.

Last year, the bank had a slippage of Rs 752 crore. This year it is planning to restrict the slippage to Rs 335 crore, he said. In the first quarter, with total advances of Rs 55,802 crore, the bank saw slippage of Rs 78 crore and recovery was Rs 193 crore.

Specialised branches

Union Bank set up four specialised branches for recovery last week in Calcutta, Chennai, Delhi and Mumbai. Each branch has about three-four officers, including on law officer and handles the stressed assets of about 100 branches. All NPAs of over Rs 25 lakh are shifted to these branches.

The bank has also filed 3,000 cases under the SARFAESI Act in the first quarter this year, against 1,600 cases last year. The bank has also tightened its monitoring policy. While the earlier system captured accounts in which repayment was overdue by two months, the new revised system captures accounts that are overdue in repayment by one month, Mr Taj said. The bank has also appointed recovery agents at various levels, as per RBI and IBA guidelines. Last month, the bank also got approval from its board for portfolio selling of NPAs, Mr Taj said.

Selling NPAs

"Selling NPAs in the secondary market is an option we plan to use provided we get a good price. This is the first time we will be selling NPAs," he said. "Next year we may even able to buy portfolios of NPAs, once we gain experience in recovery," he added.Union Bank is also considering a proposal to pick up 11 per cent stake in the Asset Reconstruction Company promoted by Standard Chartered Bank, which is expected to start operations soon.

(This article was published in the Business Line print edition dated August 8, 2006)
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