United Bank of India’s loan disbursement saw a degrowth in FY14 on the back of capital erosion as well as RBI’s lending cap. After a sudden surge in bad loans, RBI had in December imposed lending restrictions on United Bank, restraining it from advancing more than Rs 10 crore to a single borrower.
“During the last financial year, the loan book shrank. Looking at the capital requirements, it was a conscious decision. Stipulation of capital requirements barred us from increasing our advances. Also there was a lending cap imposed by RBI,” a senior official of the bank told FE on condition of anonymity.
While the public sector lender’s total loan disbursal stood at Rs 69,708 crore during FY13, sources in the bank said the loan book shrank to Rs 68,100 crore by the end of 2013-14.
The bank’s capital eroded sharply due to soaring bad loans and higher provisioning. The ratio of gross NPAs to total advances during the third quarter of the last financial year jumped to 10.82%.
The bank reported a net loss of more than Rs 1,200 crore in the December quarter after it had incurred a loss of R489.47 crore in September quarter. Moreover, capital adequacy fell to a little over 9% at the end of December 31, 2013. The bank will announce its fourth quarter results on May 5.
Mithun Dasgupta | Financial Express