Retail loans have come to haunt banks in the backdrop of the second wave of the coronavirus pandemic. Union Bank of India has restructured loans worth Rs 15,632 crore under the two one-time restructuring schemes of the Reserve Bank of India (RBI), of which Rs 6,833 crore is from the retail segment led by home loans.

The bank has another Rs 2,000 crore of loans in the pipeline which will be restructured by September when the scheme comes to a close, Union Bank of India managing director and CEO Rajkiran Rai said.

Under the resolution framework 1.0, the bank has restructured Rs 11,965 crore of loans. This includes Rs 3,702 crore from personal loans, Rs 2,427 crore from micro, small and medium enterprises (MSMEs) and Rs 5,836 crore from corporates.

Under resolution 2.0, the bank’s total recasts were at Rs 3,667 crore till 30 June 2021. Personal loans include Rs 3,131 crore and Rs 536 crore came from MSMEs.

The bank had fresh slippage of Rs 7,049 crore during the June quarter with Rs 1,078 crore coming from the retail loan book, Rs 3,139 crore from MSME, Rs 1,406 crore from agri and Rs 1,426 crore from the large corporates.

“On the retail segment, home loans had a stress. There is also a heightened stress on the MSME portfolio. About 45% of the fresh slippages came from the MSME segment, but this stress will be taken care of as the economy starts reviving. We will see growth in RAM (retail, agriculture and MSME). On the corporate side working capital utilisation is low and other corporate sanctions are not utilised,” Rai said.

The bank, however, expects the recovery pipeline to be strong. Resolution for 61 accounts amounting to Rs 2,127 crore is already approved by the committee of creditors (CoC) and another 37 accounts with Rs 3,529 crore is close to resolution. “We have projected recoveries and upgradations to the tune of Rs 13,000 crore this year. It was around Rs 4,300 crore in the first quarter and we feel that the full fiscal target is achievable,” Rai said.

In the fiscal first quarter, the bank reported a three-fold rise in its net profit to Rs 1,181 crore despite elevated provisions. This came on the back of lower expenditure and higher other income.

The bank’s gross non-performing assets (NPAs) stood lower at 13.6% of its advances at Rs 87,762 crore. In the year-ago period, gross NPAs at Rs 97,189.95 crore comprised 14.95% of advances. The bank wrote off bad loans of R s 4,734 crore in the June quarter, upgraded Rs 3,194 crore and had recoveries of Rs 1,147 crore.

Non-interest income surged 98.4% to Rs 2,900 crore, with Rs 1,109 crore coming from sale of investments in treasury and Rs 330 crore from recovery. Recovery from the Kingfisher account was Rs 256 crore. Treasury income also shot up by 92.38% to Rs 1,214 crore.

Net interest income (NII) grew 9.5% to Rs 7,013.4 croe in the quarter while total income of the bank rose marginally to Rs 20,666.62 crore from Rs 20,487.01 crore a year ago.

The yield on advances was down to 7.20%, cost of funds was lower at 3.71% as against 4.31% in the year-ago period. The cost of deposits also fell to 4.17% from 5.03% a year ago.

Total deposits grew 1.79% to Rs 9,08,528 crore. Of this, CASA (current account savings account) grew 11.23% to Rs 3,30,604 crore. Retail term deposits and CASA comprised 81% of the total deposit base.

The bank invested Rs 34,144 crore into the corporate bonds of companies.

The loan book was almost flat at Rs 6,45,091 crore. Retail loans grew 10.61% to Rs 1,25,445 crore as on 30 June. Agricultural loans grew by 12.62% to Rs 1,18,825 crore.

“The bank is expecting to grow its advances by 8-9% during the year,” Rai said.