RBI loosens lending rules further for United Bank of India

KOLKATA: The Reserve Bank of India ( RBI) has further eased lending restrictions on United Bank of India, which had been hit by non-performing assets, allowing it to give advances to companies rated below ‘triple A’ if it recovers bad loans.

The regulator removed the curbs with some caveats and linked the relaxation to the state-owned lender’s ability to make cash recoveries from non-performing loans, three senior bank officials said. The bank will be able to lend double the amount it recovers in cash, subject to a ceiling of Rs 100 crore. “UBI needs to get into normalcy and start lending, otherwise its credit-deposit ratio will fall,” RBI said in response to a query by ET. “We have also tried to incentivise UBI’s cash recovery as recovery has flattened.”

“Removal of lending restrictions is going to help UBI to turn around faster,” said Sanjeev Jain, an analyst with Microsec Financial Services.

UBI executive director Deepak Narang told ET that the bank will start lending to borrowers rated below ‘triple A’ after it gets some proposals.

RBI allowed UBI in the first week of June to lend up to Rs 200 crore only to ‘triple-A’ rated borrowers after the bank turned around its fortunes by posting a Rs 469-crore net profit at the end of March compared with a loss of Rs 1,238 crore in the December quarter.