UBI in talks with ARCs to sell Rs 100 crore of bad loans
Moneylife Digital Team 18 March 2010

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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