When Archana Bhargava put in her papers as Chairperson and Managing Director of United Bank of India (UBI) in February this year, the 2,000-branch strong bank was in the midst of a crisis. Spiralling non-performing assets (NPAs); huge provisioning and back-to-back losses in two quarters saw the net loss rise to ₹1,683 crore during the first nine months of 2013-14. Despite being headless, it scripted a dramatic turnaround in the January-March period with a quarterly net profit of ₹470 crore. In an interview to Business Line , Sanjay Arya, Executive Director of UBI, spoke about the swift turnaround story, the way forward, recent focus on retail portfolio and fund-raising plans. Edited excerpts:

What has been behind the fourth quarter turnaround?

In the two quarters when we made losses, NPAs had shot up. Even then, the bank’s operating profits and margins (operating) were intact. The huge provisioning burden for the standard assets turning NPAs dragged down profits. In the fourth quarter (of FY14) too, we saw fresh slippages. We went in for a recovery drive and prevention of slippages.

Through these, the bank reduced NPAs from around ₹8,546 crore as on December 2013 to ₹7,118 crore as on end-March 2014. In the last quarter (January-March), we did not make any fresh provisions. There was a write-back of provisions, made earlier in the fiscal, to the tune of ₹35 crore.

Our net interest income in the January-March quarter also saw a 24 per cent jump (on a year-on-year-basis) with the conversion of accounts worth ₹1,488 crore from NPAs to performing assets.

How many such NPAs were converted into performing assets by the bank last quarter?

Most recoveries and conversions (into performing assets) were in small value accounts; mostly from the branches located across the States of West Bengal, Bihar, Odisha, Tripura and Assam.

During the quarter ending March 2014, we made recoveries at the rate of 8,000-9,000 accounts a day. Cash recovery was to the tune of ₹645 crore during the quarter.

Is the tempo of recoveries continuing in the first quarter of FY15?

The monsoon and transfer of officials may affect recoveries somewhat this quarter. Also, the overall economic slackness still persists. We are, however, hopeful that our annual target of bringing down NPAs to ₹5,500 crore would be met.

Any specific reason as to why UBI faces the pressure of bad loans?

Our geographical area of operations (in the East and North-East) and the overall performance of the region is a reason. Another point, I feel, is that since 2008, 2009 and 2010, we have had huge exposures in certain industries such as iron and steel, power and infrastructure. In hindsight, the high exposures were not very suitable for a bank of our size.

The capacity to absorb shocks was not there.

Do you intend to shore up the branch network?

No, as we are currently in a process of consolidation, including the branch operations. Despite profits in Q4, the bank reported a net loss of ₹1,213 crore for whole year (FY14).

The present focus is on improving our asset quality, profitability and strengthening the capital adequacy ratio.

Our capital adequacy ratio (according to Basel III norms) stands at 9.81 against the RBI mandated 9 per cent.

Are you looking at fund infusion for improving capital adequacy?

Yes. We have sought shareholders’ approval for infusion of ₹275 crore as preferential allotment to the Government, and another ₹300 crore as preferential allotment of equity shares to LIC (Life Insurance Corporation of India).

A QIP (qualified institutional placement) of ₹1,000 crore might also be explored in the second half of FY15.

Going forward, what are your focus areas, especially when corporate lending has dipped?

There has been no major fresh (debt-based) capital expansion over the last one or two years.

What we saw has been refinancing acts. However, there are opportunities in retail lending, which we can tap.

Currently, retail constitutes around 7 per cent of our lending. By the end of this year, we would like to take it to 15-20 per cent.

Our focus would be on home and mortgage loans — trade loans based mostly on property collaterals.

This apart, our retail portfolio includes SME (small and medium enterprise) loans; education loans; and personal loans to government and employees of public sector units.

Any specific steps for pushing retail loans?

We have set up 26 retail processing hubs in the country. They act like separate cells with people having decision-making authority.

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