City Union Bank to focus on ECLGS, gold loans for now

South-based private sector lender City Union Bank (CUB) said it will for the time being focus on the emergency credit line guarantee scheme (ECLGS), gold loans and restructuring of facilities, with a view to hand-hold borrowers and keep slippages at the minimum.

“Our current growth is coming from disbursal of ECLGS loans and gold loans only. We will review this in Q4 and take a decision on how to go about the growth,” N Kamakodi, MD & CEO, told an earnings call.

Between September 30, 2019 and September 30, 2020, the bank saw a credit growth of 6%. “Our current growth is coming from disbursal of ECLGS loans and gold loans only. The increase in disbursement of ECLGS and gold loans during H1of FY21 resulted in an improvement of CAR to 17.36% in Q2 from 16.29% in March 2020 on account of the zero percent risk weight prescription,” he said.

CUB had sanctioned Rs 1,807 crore under ECLGS till September 30, 2020. Currently, gold loan stands at Rs 4,537 crore and it can go up to 20%-22% of the portfolio. The bank is seeing demand for ECLGS as customers are using it as surplus capital or for repaying old loans.

Kamakodi said the bank could achieve over 90% in collection efficiency. After the moratorium period, accounts covering exposure of 94.53% to cash credit accounts (CC a/cs) or short-term loans and 85.70% to term loan accounts, totalling 90.52% of exposure, received payments.

“ We have restructured 175 accounts to the tune of Rs 478 crore till September, of which 131 are under MSME amounting to Rs 455 crore and the remaining 44 in non-MSME amounting to Rs 23 crore. Further, 162 accounts amounting to Rs 430 crore under MSME and 124 accounts amounting to Rs 729 crore in non-MSME category are under process. Total restructuring will be 5-6%, and we expect the slippage ratio to be at 3% to 3.50% for the current financial year. Most of them will be accounts which had issues even before the Covid-19,” he said.

“We will plan restructuring timelines according to the regulatory guidelines. We will give some of the sectors which are stressed, like hotels, maximum time period allowed by regulators,” Kamakodi said.

CUB made a provision of Rs 115 crore in Q2 and Rs 100 crore in Q1 for Covid-related requirements. “Totally, we have a made an ad hoc Covid provision of Rs 317 crore to meet any future contingency, apart from Rs 23 crore provided in Q4 towards specific requirements. Though recoveries have shown some improvements, the same was not as witnessed during pre-Covid time. The recovery during Q2 improved to Rs 84.39 crore, against Rs 24.27 crore in Q1,” he said.