Because the Reserve Bank of India (RBI) has decided to lift UCO Bank’s prompt corrective action (PCA) restrictions, the bank will now take non-fund business exposure to boost non-interest income and expand exposures in the lower-rated, unsecured segment with proper due diligence, according to the bank’s MD and CEO AK Goel.
Goel tells Mithun Dasgupta in an interview that the lender will strive to expand its branch network in places where it has a low presence but high development potential. Excerpts:
Will the Reserve Bank of India’s (RBI) decision to eliminate UCO Bank’s Prompt Corrective Action (PCA) limits help the bank grow its business more quickly?
Yes, Uco Bank can now engage in non-fund activity, which requires less capital and contributes to the bank’s non-interest revenue. It can now lend to debtors who are highly rated yet unsecured, taking into account the risk-reward trade-off.
Will the Bank now be able to make larger loan disbursements?
Except for some limits on low-rated consumers, unsecured loans, and exposure in non-fund-based business, PCA had not placed any restrictions on lending to large ticket size loans. During the PCA restrictions, banks were hesitant to lend to large ticket size customers unless they were highly rated, and lending to this segment was limited to AAA/AA, central/state government-guaranteed loans, PSUs, and customers with very high market reputations, among other things.
What are the measures that should be implemented to achieve more growth in the future?
Even once the PCA restriction is lifted, the bank will be wary of lending to hazardous sectors or consumers. With sufficient due diligence and consideration of the risk-return trade-off, it will expand exposures in the lower-rated, unsecured market. To increase non-interest income, the bank will take on non-fund business. To satisfy its higher growth requirements, it will continue to place a greater emphasis on lending to retail, MSME, agribusiness, and higher-quality corporate customers.
Will Uco Bank grow its branch network in the future?
Yes, one of PCA’s limitations was that it could not grow its branch network. Following the removal of the prohibition, the bank will strive to expand its branch network in places where it currently has a limited presence but has high development potential.
The gross NPA ratio was 9.37 percent after the first quarter of this fiscal year, while the net NPA ratio was 3.85 percent. Is the bank aiming to reduce nonperforming assets (NPAs) even more by the conclusion of this fiscal year?
To prevent further NPA slippages and increase recovery from non-performing accounts, the bank has upgraded its credit monitoring and recovery procedure.
As a result of these measures, the company’s net nonperforming assets (NPA) ratio stayed below 4% in June 2021. By the conclusion of this fiscal year, we expect the bank gross NPA ratio to be around 8% and the net NPA ratio to be around 3%.