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'Downsizing, NPA recovery can turn around Uco Bank'

The Calcutta-based nationalised Uco Bank could be made a viable turnaround entity if drastic measures are taken to reduce the cost of the staff and recover funds from the non-performaing assets, particularly in large borrowers' accounts.

Sharda Singh, Uco Bank chairman, who is retiring by the year-end, said today in Bombay that besides implementing prudential norms, the amendment of existing laws is key for revival of weak banks in India. This, along with the reduction of manpower cost, would basically determine the future health of our banks, he said.

The bank had been spending about Rs 4.5 billion annually towards its staff while its growth rate was restricted to 8 per cent against the industry growth rate of 20 per cent. However, in recent years, the bank made vigorous efforts to reduce its NPAs and cost and recoiled its growth rate back to industry level of 15-16 per cent.

It is set to achieve the break-even point by posting an estimated operating profit of Rs 900 million during the financial year ended March 2000.

The bank has identified 100 loss-making branches and many of these branches would be either closed down or shifted to merge with other branches in order to reduce the cost.

To reduce the cost of staff, the bank has two options -- either to increase business volumes to enhance income or to implement voluntary retirement scheme effectively. The bank has filed 300 cases in courts and the Board for Industrial and Financial Reconstruction to recover bank finances from the industrial units mostly of which are in cotton textiles, engineering and tiny industries.

The bank has gross NPAs of Rs 15.30 billion of which 60 per cent provisions are made by the bank against the securities. In the next couple of months, the bank is expected to recover another Rs 500 million from its NPA accounts.

Singh said that the bank should be recapitalised to the tune of Rs 15 billion or it be allowed to raise tier-II capital by issuing bonds to institutions, retail investors and funds.

Meanwhile, the bank has been allowed from this week to collect direct taxes at its 28 branches in Bombay and its suburbs. This would help the branches to earn additional non-interest income that would ultimately help the bottomline of the bank, he said.

In the first half of the year, the gross collections of direct taxes in the city were in the region of Rs 80 billion. Banks earn 11.85 paise per Rs 100 towards collection of these taxes.

UNI

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