RBI finds bad loan divergence in Union Bank

Public sector lender Union Bank of India reported a ₹3,370-crore loss in the January-March period of 2018-19 even as the Reserve Bank of India’s (RBI) annual inspection found the lender had under-provided, also known as ‘divergence’ in banking parlance, in 2017-18.

The divergence is also because of its exposure to troubled infrastructure conglomerate — Infrastructure Leasing and Financial Services — which turned bad.

Following the RBI inspection report, the bank had to make additional provisioning of ₹2,281 crore in Q4. For IL&FS, an ₹880 crore provision was made.

While the lender had reported a ₹2,583 crore-loss a year earlier, it had recorded profits in the first three quarters of 2018-19.

“The worst is behind us,” said Union Bank MD and CEO Rajkiran Rai G. during the post-earnings media interaction, saying slippages in non-performing loans have come down significantly, from over ₹10,043 crore in Q4 of FY18 to ₹3,275 crore. Going ahead, he expected slippages to come down further to ₹2,300 crore per quarter.

The net interest income of the bank grew 18.6% to ₹2,602 crore during the reporting period while non-interest income rose 16.2% to ₹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.

With agency inputs