• Soured loan ratio rises to 15.43% of total as of March 31
  • Asset quality pain at UCO Bank can worsen further: Analyst

UCO Bank, an Indian state-owned lender with 629 deliberate defaulters, reported the highest bad loan ratio among banks in the South Asian nation. Shares fell the most in three months.

Provisions for soured debt at the Kolkata-based company more than doubled to about 23 billion rupees ($344 million) in the three months through March from a year ago, according to exchange filings on Friday. Bad-loan ratio as a part of the total surged to 15.4 percent from 6.8 percent. 

Shares of the bank fell 6.2 percent to 33.95 rupees in Mumbai, the biggest decline since Feb. 10. UCO Bank reported a net loss of 17.2 billion rupees in the quarter, filings show.

UCO Bank’s delinquent debt ratio is more than three times the 5.1 percent of loans that were deemed as non-performing loans among all Indian lenders as of Sept. 30. Fitch Ratings, which in a Nov. 3 note predicted stressed-assets ratios in Indian banks to peak by the end of the first quarter, now sees a possible “inflection point” in the ratio in March of next year, according to Saswata Guha, the agency’s Mumbai-based director for financial institutions.

“Asset quality pain for UCO Bank can worsen further in coming quarters,” Rethish Varma, head of research at Bengaluru-based Aditya Trading Solutions Ltd., said by phone. “Going ahead, the government will have to inject more capital into the bank to keep its risk buffers above required level.”  

An e-mail seeking comments sent to the public relations department of the lender wasn’t immediately answered.

The government had infused 9.4 billion rupees into UCO Bank in the quarter to bolster its capital ratio, the filing showed. The surge in bad loans eroded the overall capital adequacy ratio at the bank to 9.63 percent, which is lower than the 12 percent that the government has been aiming at for state-run banks.

The bank has 629 so-called “wilful defaulters,” or debtors who don’t repay loans despite the bank’s claims that they have the funds to do so, data posted on UCO Bank’s website shows. 

Another state-owned lender Punjab National Bank that is set to report earnings for the March quarter on May 18, has 905 such debtors, who collectively owe the bank more than 114 billion rupees, data posted on its website shows.

Eleven state-run lenders had reported losses in the three months ended Dec. 31. Results from ICICI Bank Ltd. and Axis Bank Ltd. last month and comments from their top managers had fueled concerns that dud loans will continue to pile up, even after pressure from a Reserve Bank of India audit had made them accelerate recognition of nonperforming debt.

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