Calcutta, Aug. 17: The United Bank of India (UBI) has once again approached the Reserve Bank to ease restrictions on lending following subdued credit flow in the quarter ended June.
On the back of a better recovery of bad loans and an improvement in capital adequacy, the PSU bank has sought permission to lend to AA-rated companies, which are comparatively riskier than the AAA-rated companies to which the bank lends now.
“We have approached the RBI to allow lending to AA- rated borrowers. The RBI has been gradually easing restrictions on lending and we are positive that this would come soon,” UBI executive director Sanjay Arya said.
Last year, the central bank had imposed a cap of Rs 10 crore on lending, with the UBI’s non-performing assets rising to 10.82 per cent of the advances at the end of December and its capital adequacy ratio coming close to the minimum requirement of 9 per cent under Basel III norms.
The RBI, however, relaxed the restrictions in June as the bank posted a profit for the quarter ended March after suffering losses in the previous two quarters mostly on account of higher provisions for bad assets. The regulator allowed the city-based bank to lend up to Rs 200 crore to PSUs and corporate borrowers rated AAA by credit rating firms.
During the April-June period, the UBI’s total advances came down to Rs 676.40 crore from Rs 715.34 crore in the same period a year ago. Though the bank posted a net profit in the quarter, operating profit declined 4.35 per cent to Rs 574.20 crore.
Arya said the easing of restrictions would allow the bank to resume normal lending activities.
The UBI has recovered more than Rs 1,200 crore of bad loans in the first quarter and was able to reduce its gross NPAs to Rs 7,097.44 crore at the end of the quarter from Rs 7,118.01 crore in the preceding quarter.
Capital adequacy ratio improved to 9.80 per cent.