Bad loans of Union Bank have been diverged, finds RBI
Union bank made additional provisions as suggested by the central bank. Public lending Union Bank reported a loss of Rs. 3,365 crore in the Jan-March period of 2018-19. Though RBI has stated that the bank has underprovided loans, also known as ‘divergence’ in banking parlance, in 2017-2018.
The divergence could also be attributed to the bad loan of Infrastructure Leasing and Financial Services associated with Union Bank. The bank had to make a provision of Rs. 2,281 crore in Q4 and Rs. 800 crore for IL-FS bad loan, following RBI’s recommendations.
Even though the Union bank reported losses of Rs. 2,580 crores last year yet had made profits in the first three quarters of 2018-19.
Union Bank CEO and MD, Rajkiran Rai G. said in a press meet that “Worst is behind us,” indicating that the non- performing assets had been on a decrease from over Rs. 10,043 crores in Q4 of FY18 to Rs. 3,275 crore and now the financial conditional of the bank would better with time. Going ahead, these figures are expected to come down to Rs. 2,300 crore per quarter.
The net interest income of the bank grew 18.6% to Rs. 2,602 crore during the reporting period while non-interest income rose 16.2% to Rs. 1,272 crore. The net interest margin for Q4 of FY19 was at 2.27% compared with 1.9%.
While overall loan growth remained muted at 3.7% as the bank curtailed international operations, this year the lender has targeted 10-11% growth in advances and 8% in deposits.