Union Bank of India has decided to give zones, regions and branches explicit profit targets rather than just topline growth targets so that the bank can be back in black in 2018-19. The public sector bank is banking on a combination of sale of assets, which have been proceeded against under the Insolvency and Bankruptcy Code (IBC), as well as receipts from asset resolution under IBC to get the net non-performing assets (NNPAs) level down from 6.96 per cent now to below 6 per cent in the next couple of quarters. MD and CEO Rajkiran Rai G, in an interaction with BusinessLine , said his bank is getting back-offices to do loan processing and sanctioning so that the branch staff are free to source quality business. Excerpts:

What are your plans to get your bank back into profit?

We have actually restructured our businesses to a great extent. So, I think, next year our growth will come from the right segments — we will pick up the right kind of businesses.…We are looking at more of profitability. Therefore, performance evaluation of zones, regions and branches will be based on profits and not on topline.

So, anyway, the targets like current account, savings account deposits, retail advances, micro and small enterprise advances, direct advances to agriculture, etc., will remain.

Now what is happening in the field is that mostly people try to concentrate on topline rather than looking at profitability. So, going forward, we will be focussing more on profits. The target setting will be based on profits so that everybody (at the zone, region, and branch level) plans their business well.

It (topline growth) will be incidentally happening with bottomline growth but then we are not going to focus on topline. We have crossed ₹7 lakh crore (₹7,12,993 crore, to be precise) in business (deposits plus advances).

That doesn’t mean that we will be looking at ₹8 lakh crore business next year. We will be happy with ₹7.50 lakh crore if we are able to improve profitability. So, the thought process is changing in that direction. We are expecting that we will become a very profitable bank in 2018-19 and 2019-20.

Can you throw some light on the business restructuring your bank has undertaken?

Loan processing capability of Union Loan Points (retail loan processing and acquisition units) and Saral centres (micro, small and medium enterprise loan processing units) is being effectively harnessed.

Branch staff now only have to source loan proposals and forward them to these loan-processing hubs. The bank is replicating this model for agriculture loans as well. We have created marketing hubs called customer acquisition groups that will help branches get leads (on customers).

We are setting up 25 mid-corporate branches in Tier- 2 cities. This is another area which is opening up because many banks are reducing their corporate credit. So, better rated corporates are likely to shift to better managed and larger banks. So, these branches will help us tap mid-corporate business.

We are planning in a big way to capture the next phase of growth (in the economy). We are trying to ensure that we don’t again repeat the same mistakes. So, we are structuring our business accordingly so that the right kind of (loan) underwriting happens.

What is your outlook on NPAs?

From the beginning we have been saying that the pain is there in the system, and capital permitting, we want to quickly clean up the balance sheet and come out (of the bad loans issue) as early as possible.

I think, to a great extent we have achieved that. We do not have any backlog of provisions but then there is some ageing related provision because about ₹7,000 crore of assets under Strategic Debt Restructuring, Scheme for Sustainable Structuring of Stressed Assets, and all that remain.

We are not expecting everything to slip (from these ₹7,000 crore worth of assets). So, I think, with some recognition in the last quarter (March 2018) and some provisioning, we should be almost close to an end (of the NPA recognition and provision cycle).

Anyway, I am not saying that after that there will not be any NPAs, but then it will get back to normalcy. Normally, our delinquency is supposed to be 2.0-2.5 per cent. So, I think, we should be reaching these levels in 2018-19.

What is the update on NCLT accounts?

We have cleaned up our balance sheet as far as NCLT (National Company Law Tribunal) accounts are concerned, which require minimum 50 per cent provisioning. Normal provisions will happen in the next quarter. But then there will be no NCLT (provisioning) burden.

Good offers are coming for accounts (in RBI’s first list) that have been referred to the NCLT. The resolutions should happen. We are not expecting anything in Q4 (January-March quarter).

But then, in next Q1 (April-June 2018) and Q2 (July-September), we should see some major resolutions and money actually hitting our books. So, that should be giving us a lot of relief next year.

We knew that this (NPA) will only be a temporary issue for three to four quarters. We had planned that we will take the hit (provide for the NCLT accounts) and, accordingly, we raised about ₹2,000 crore of capital and now the government has also allotted us capital.

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