UCO Bank willing to take 40-45% haircut to keep book free of NPAs, says MD

Fighting a corrective action plan imposed by RBI for huge non-performing assets (NPAs), UCO Bank is putting its focus on bad loans resolutions. It is also willing to take a 40-45 per cent haircut for bigger cases under the National Company Law Tribunal (NCLT) to keep its books sticky assets free, RK Takkar, managing director and CEO of the bank, (in pic) said.

“The focus is on NPA resolutions either through NCLT or other means. Our gross NPA is Rs 24,000 crore and net is about 9.98 per cent. In the first list of 12 cases of RBI, we have nine cases in NCLT where the exposure is Rs 4,300 crore and in the second list we have 16 cases out of 29 where we have a Rs 4,700 crore hit”, he told Financial Chronicle.

Takkar said things are ha­ppening on this front. In many bigger cases, bids are already there for resolution in the first list.  “Resolution will depend on after the bidding process is over and th­ose bids, which are found to be feasible, have to be accepted by the committee of creditors. It’ only then that we stand at the threshold of a successful resolution process.

“The haircut is another issue and it depends on case to case. In the bigger cases, the haircut should be around 40-45 per cent, which is what we see from the market”, Takkar said.

A few bankers, when spoken to, said something is better than nothing. Taking a hit of 40-50 per cent at least gives them some funds back rather being a complete writing off, they said.

Takkar said it is difficult for a bank to say how much it will get from the recap bonds, as it is for the government to decide. “We have given our requirements to the ministry. We are expecting funds from the bonds in this quarter,” he said.

To increase its capital requirement, the bank plans to tap the market to raise money. “We will soon go for qualified institutional placement (QIP) of Rs 500 crore from the capital market. We have just got Rs 1,375 crore in the last week of December. The balance of funds are expected from LIC, the government’s direct infusion or through recap bonds, Takkar said. State life insurer LIC in the past pumped capital in the public sector banks through preference share allotment and qualified institutional placement.

Earlier this year, Bank of India issued Rs 451 crore preference shares to LIC. Similarly, UCO Bank, IDBI Bank, United Bank of India, Dena Bank and the Indian Overseas Bank issued preference shares to LIC in the last few years as part of their effort to shore up capital.

In the Rs 15,000 crore QIP placement by the State Bank of India (SBI), LIC was one of the largest participants. It picked up shares worth Rs 5,800 crore or 38.6 per cent of the total.

UCO Bank shares were down by 1.5 per cent on BSE on Friday at Rs 32.80.

According to latest RBI data, capital adequacy ratio of the public sector banks  as on September 30 was 12.2 per cent while the CET1 ratio was 4.7 per cent.

UCO Bank, for example, had a CET1 of 6.64 per cent and gross non-performing asset ratio of 19.74 per cent as on September 30.

The Kolkata-based bank had earlier informed stock exchanges the Centre had informed it on December 28 its decision to sanction release of Rs 1,375 crore towards preferential allotment of equity shares.

This was done as part of the release the much-required equity capital to six stressed the public sector banks as some of these lenders were on the verge of breaching minimum capital norms on December 31, 2017. These lenders were asked to improve on parameters such as bad loans and recovery.