UBI in talks with ARCs to sell Rs 100 crore of bad loans

The Bank plans to sell off Rs100 crore of its bad loans by end-March and has already sold Rs200 crore worth of bad assets so far in this fiscal

United Bank of India (UBI) is negotiating with a clutch of asset reconstruction companies (ARCs) to sell bad loans worth Rs100 crore for cleaning up its loan book, a senior bank official said on Thursday, reports PTI.

The Bank plans to sell off Rs100 crore of its bad loans by end-March and has already sold Rs200 crore worth of bad assets so far in this fiscal, UBI's executive director TM Bhasin told reporters at the bank's listing ceremony in Mumbai.

"We have received bids from ARCs to sell our bad assets. We are currently evaluating bids and expect to sell Rs100 crore worth of bad loans by the end of this month," he said.

The decision to sell off bad loans is part of the restructuring of the bank's advance portfolio and will also reduce the non-performing assets (NPAs) burden, Mr Bhasin said, without outlining the segments which have incurred most of the losses.

Kolkata-based UBI has a gross NPA level of 2.4%, while its net NPAs stand at 1.21%. This is slightly higher than its peers.

UBI currently has a loan book of Rs43,000 crore, while its total deposit base stands at around Rs67,000 crore. UBI today got listed on the Bombay Stock Exchange with a 17% premium at Rs77 against an issue price of Rs66 per share. On the NSE, the shares were listed at Rs74.9, a premium of 13.48%.

With UBI going public, Punjab & Sindh Bank is the only unlisted public sector lender now. Central Bank of India was the last state-run bank to get listed.

To purge their balance sheets by this fiscal-end, many banks either opted for one-time settlement of their defaulted advances or sold them off to ARCs.

NPA levels started rising in the system, particularly in the last one year, post the financial crisis that hit many businesses and resulted in job losses.

Top bankers, including State Bank of India chairman, OP Bhatt, had recently indicated that the slippages are likely to rise in the coming months and a substantial economic recovery is yet to take place.

However, rating agency CRISIL had recently said that the pace of rise of NPAs is likely to slow down in the approaching months as companies are now in a better position to repay their loans.

The agency, which projected that gross NPAs in the system would grow to 5% of the total assets by end-FY11, now expects the ratio to be around 4.5%.
 

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A short dip is around the corner

The market still looks overbought; expect a dip in a day or two

The breakout we mentioned yesterday has taken the market higher. The Nifty was up 0.85% at 5,231 points from yesterday’s close of 5,198.10, while the BSE's 30-share index rose by 1% or 106.90 points at 17,490.08. Of course, selling took over after 1.30pm in the afternoon and the market came down in the end to the same level as the opening.

Despite the fact that the market looks overbought, the short-term trend is still up. Every single market in the Asia Pacific region was in the green except the NZX50.
 
Jakarta was the highest gainer (up 3.25%) followed by KOSPI (up 2.11%) and the Hang Seng was up by 1.72%. Shanghai’s index jumped 1.93% after a continuous slump from 11 March 2010. All this bullishness was followed by an overnight strength in US markets where the Dow was up 44 points, and the Nasdaq was up 16 points.

American markets closed in the green yesterday as the Federal Reserve announced that it was not tweaking interest rates as of now, a move which augurs well for risky assets such as emerging market equities. Until there is a sharp sign of reversal by the Fed and other central banks, the Indian market is going to push ahead, subject to short-term dips. All European markets were up at the time of writing.

Among the Nifty movers, Cipla Ltd was up 5.10% at Rs334, Idea Cellular Ltd was up 3.29% at Rs64.40, Hindalco Industries Ltd was up 2.42% at Rs173.65, and Larsen & Toubro was up 1.84% at Rs1,628.60 after the company announced that it had won an order worth over Rs1,000 crore from ONGC.

Among the major losers in the Nifty, Unitech Ltd shed 2% at Rs73.50, Maruti Suzuki was down 1.63% at Rs1,435, Tata Power was down 1.48% at Rs1,364.15, BPCL was down 1.27% at Rs538.35, and Hindustan Unilever was down 1.24% at Rs223.90. We expect the market to dip in a day or two. Whether that will signal the end of the rally since the Budget, only time will tell. Stocks remain highly overbought.

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Reduced NFO period for MFs may limit market penetration, say distributors

SEBI’s new idea to limit the timeframe for NFOs to 15 days will create even greater problems for the fund industry. But most importantly, it will undermine SEBI’s own agenda of market development by cutting off smaller towns

Market watchdog Securities and Exchange Board of India (SEBI) has reduced the timeframe to complete a new fund offer (NFO) within 15 days—for both open-ended and close-ended schemes—in a move to speed up the allotment process. However, according to industry sources, the move will have a negative impact on asset management companies (AMCs) as the marketing of NFOs is a cumbersome and time-consuming process.

“SEBI does not give permissions to launch NFOs quickly. It’s a time-consuming process where retail marketing is concerned. It takes four-five days to get the stationery (like the NFO form and prospectus) from the AMC. We have to send thousands of mailers to our clients, out of which we get 30-40 responses. Then our sales executives go and meet them personally. We end up with 15-20 clients,” said a distributor.

After SEBI banned entry load on MFs, distributors have started tightening their purse-strings. Many smaller distributors use book post (a cheaper form of postal delivery for books, documents and printed material) to distribute application forms to their clients, which usually takes three to four days to reach their destinations. While fund houses are currently brainstorming on the new rule and are tightlipped over the issue, distributors are not too elated over the move.

“Asset management companies (AMCs) will have less time on their hands and they can’t spend more on advertisements. The impact will be negative. The bulk of the money comes in the last four days (of the offer), “said a distributor.
“It may be a good move by SEBI, but the regulator should give more time to distribute MFs in smaller towns,” said an IFA.

SEBI has also extended the supported by blocked amount (ASBA) facility for MFs wherein the subscription money will only be debited from the bank accounts of investors once the MF units are allotted. The move doesn’t seem to have much relevance as an NFO is never oversubscribed, unlike an initial public offering.
 

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COMMENTS

manoj Chaturvedi

7 years ago

MF Industry is being made R & D ground by sebi, one side you talk about market penetration on the other hand you take steps which kills MF industry,high time Govt should wake up & take steps which will implement their India growth story.

Devendra

7 years ago

SEBI is not spare any stone unturned to harm distributer conmunity. This move is also in that direction. Mr. Bhave is doing serious damage to INdian growth story. Finance minister and Prime minister must stop this man

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