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Union Bank of India plans to use the ₹4,112-crore capital infusion from the government to improve its provision coverage ratio (PCR) towards loan losses and step up credit.
Rajkiran Rai G, MD and CEO, said the bank will make judicious use of resources (as well as recoveries from stressed assets) to ensure that PCR goes up from 58.84 per cent in the December 2018 quarter to 70 per cent over the next 2-3 quarters and that the advances portfolio expands.
Once PCR goes up, the public sector bank will be in a position to bring down its net non-performing assets (NNPAs) below 6 per cent of net advances. As of December-end 2018, the NNPA ratio stood at 8.27 per cent of net advances, against 8.42 per cent in the preceding quarter.
PCR is the ratio of provisioning to gross non-performing assets, and indicates the extent of funds a bank has kept aside to cover loan losses.
As of December-end 2018, Union Bank had a PCR of 67 per cent towards its exposure to accounts (23 in the bank’s case) referred under the IBC.
In the RBI’s prompt corrective action (PCA) framework, when it comes to the asset-quality indicator (which is one of the four indicators, the others being capital, profitability and leverage, for putting a bank under PCA), NNPA greater than or equal to 6 per cent but less than 9 per cent comes in the Risk Threshold 1 category.
Meanwhile, the bank, in a stock exchange notice,said the government has conveyed its decision to infuse ₹4,112 crore in its equity by way of preferential allotment.
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