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Edited Transcript of UNIONBANK.NSE earnings conference call or presentation 2-Aug-19 1:00pm GMT

Q1 2020 Union Bank of India Ltd Earnings Call

Mumbai Aug 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Union Bank of India Ltd earnings conference call or presentation Friday, August 2, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Monika Kalia

Union Bank of India - GM & CFO

* Rajkiran Rai Gundyadka

Union Bank of India - MD, CEO & Director

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Conference Call Participants

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* Ankit Choudhary

Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst

* Chintan Shah

Elara Securities (India) Private Limited, Research Division - Associate

* Mahrukh Adajania

IDFC Securities Limited, Research Division - Director

* Pritesh Bumb

Prabhudas Lilladher Pvt Ltd., Research Division - Equity Research Analyst

* Rakesh Kumar

Elara Securities (India) Private Limited, Research Division - VP and Analyst

* Roshan Chutkey

ICICI Prudential Asset Management Company Limited - Associate VP and Analyst

* Saikiran Pulavarthi

Haitong International Research Limited - Research Analyst

* Shreya Shivani

CLSA Limited, Research Division - Research Analyst

* Sneha Ganatra

Subhkam Ventures - Analyst

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Presentation

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Operator [1]

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Good evening, everyone. On behalf of Elara Capital, we welcome you all in Union Bank Q1 results conference call. We have with us Union Bank's MD and CEO, Executive Directors and senior management team. I would like to request CFO madam to read out disclosure statement and thereafter, we would begin the call. Thank you.

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Monika Kalia, Union Bank of India - GM & CFO [2]

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Good evening, everyone. Before getting into the con call, I'll read out the usual disclaimer statement. I would like to submit that certain statements that may be discussed during the investor interaction may be forward-looking statements based on the current expectations. These statements involve a number of risks, uncertainties and other factors that cause the actual results to differ from the statements. Investors are therefore requested to check the information independently before making any investment or other decisions. Thank you. Over to you, sir.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [3]

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Yes. Good evening. It is my pleasure and privilege to welcome you all on Union Bank of India investor conference call on financial results for quarter ended 30th June 2019. It was an interesting quarter intervened by general elections, which saw a resounding mandate for incumbent government. Our electorate has ensured that India has firm political capital to take decisions at a time external -- at a time external environment is full of challenges. There is geopolitical concern around Middle East and trade war accentuating among 2 largest economies of world. Europe is also caught in Brexit-based uncertainty. These developments have taken toll on investment sentiments with global trade seem subdued going forward. The International Monetary Fund has thus revised its outlook for global growth, including India, which is seen somewhat resilient among emerging markets.

Coming to banking and finance. While credit growth is seen recovering, the broad-based demand is still some time away. There emerged a few concerns in nonbanking space, which called for concerted response from all stakeholders. The bank financials need to be appreciated in this context, wherein recovery on large ticket accounts got delayed while new challenges emerged.

Friends, I'm happy to tell you that Union Bank continued to progress well along the direction we shared at the beginning of quarter. Our Domestic Advances rose 2.7% over last year, while share of RAM sectors in loan book stood at 55%. The CASA share in deposits stood at 34%, similar to last year. Average CASA, however, improved by 110 basis points to 34.4%, which reflects in our cost structure.

At operating level, net interest income stood at INR 2,519 crores, while fee income stood at INR 990 crores. It was INR 2,626 crores and INR 1,208 crores, respectively, during corresponding period last year. Of fee income, the treasury income stood at INR 345 crores, an increase of 19.8% over last year. Yield on advances improved 30 basis points sequentially to 7.81%, while cost of deposit came down by 5 basis points to 5.61% from March 2019 quarter.

Net interest margin stood at 2.12%. If we adjust for income accounted on stress book and earning assets in denominator, as has been reported by some of peer banks, our NIM stood at 2.36%. Cost-to-income ratio improved to 46.2% compared to 55.3% of previous quarter. The bank noted an operating profit of INR 1,887 crores during Q1. The provision stood at INR 1,662 crores, which resulted in net profit of INR 225 crores during the Q1 as against INR 130 crores profit of previous year, same quarter, an increase of 73%. The provision coverage ratio stood at 65.9% as of end of 30th June compared to 56.5% of previous year.

There was a slippage of INR 3,090 crores, which is distributed across the loan book. Our recoveries, excluding NCLT stood at INR 479 crores as against INR 459 crores during Q1 of last year, an increase of 4.36% annually. Gross NPA stood at 15.18%, while net NPA stood at 7.23% as compared to 16% and 8.7% of the previous -- of the corresponding quarter of Q1 of the last year. Credit cost stood at 1.77% during Q1, in line with our guidance. We are expecting good recovery from the NCLT referred accounts this quarter, which will reflect in better financials during Q2.

This brings me to an update on strategic transformation initiatives being undertaken in the bank. There's apparent shift in quality of underwriting through centralized structures. There's marked gains in service efficiencies as reflected in turnaround time. Today, 3/4 of our advances are processed through centralized structure. Of our loan book, the rating mix has positively changed towards better-rated exposures. There is -- this is much evident in the incremental book.

Likewise, our new structure on rural credit named Union Samriddhi Kendra has shown good momentum in tapping rural markets. The bank has taken several new initiatives in human resources management through introduction of job family and implementation of IT-based performance management. We are simultaneously focused on improving customer experiences through additional services on IVR, availability of additional languages and services on mobile app, doorstep banking to senior citizens and differently enabled members of our society. Friends, bank financials are reflective of overall developments in economy. While government has begun its spending cycle post budget, the effects on overall activity will be visible going forward. It will take a couple of quarters before positive gains start reflecting in financial with the improved credit -- with the improved credit offtake and better loan servicing. Union Bank has created right kind of structures to support its growth aspirations.

Before I conclude, let me reiterate our guidance for the financial year 2019/'20: credit growth to be 9% to 11% and deposit growth to be between 7% and 9%, NIM of about 2.4%, credit cost of 2.15% and PCR at around 68%, cost-to-income of around 45% to 46%. Our endeavor will be to contain gross NPAs below 12% and net NPAs below 6% by March 2020.

Thank you. Now we are open for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question is from the line of Ankit Choudhary from B&K Securities.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [2]

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Just firstly on this NIM part. So the NIMs have declined quarter-on-quarter. So I understand the credit cost has declined. But what are the other reasons which had led to the decline in the NIM?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [3]

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This time actually there is a good resource mobilization, but then we could not increase our advances during the quarter. So we -- our investments grew by almost INR 15,000 crores. So the yield in investment is almost 100 points -- 100 basis points lower than the advances. So this was another factor because now actually the credit offtake is happening. So gradually, this INR 15,000 crores will move to the loan book, then I think the NIM will catch up. So that is one of the major reasons.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [4]

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Okay. Because see, if I see the yield on funds has grown by 18 basis points, your cost of fund has grown by 18 basis points, so that seems that only CD ratio is the only reason. Is that so?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [5]

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Yes. CD ratio is the main reason.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [6]

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Okay. Sir, secondly, just wanted to understand what led to the higher slippages in the MSME sector this time?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [7]

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Okay. We had some regulatory forbearance on MSME of like -- which was rolled back from January onwards actually. These are the 180-day cycle actually. So during these 6 months, we saw slippage from those MSME accounts which got the benefit earlier because their NPA was pushed from 90 to 180 days and the reversal started happening from January. So there were some elevated slippages, which got the benefit earlier but they slipped during these 6 months.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [8]

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Okay. Understood. And on the CET part, so now the CET1 has gone below the benchmark, so what are the measures we are taking for capital raise or to improve the CET1?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [9]

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Benchmark is 8% for March '20. We have sufficient time to reach there. Right now, it is 7.375%. But anyway, we will like have some capital raising plan, maybe after the Q2 results. So like -- let us see -- but at this point of time, we are above 7.375%.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [10]

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Okay. And then sir, what is the current status on Dewan? So what are the things going out over there?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [11]

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Dewan is in a very advanced stage of submitting and discussing a resolution plan. So -- very close actually. Once that is done, I think we'll put it out and let us see whether all stakeholders come together. The insurance company -- IRDA has already agreed that the insurance companies can sign the inter-creditor agreement. So we are waiting for the mutual funds to come to consensus. If that happens, I think the resolution plan will be pushed. Even otherwise when the resolution plan is put out, I think even the investors who are looking for taking over DHFL, they will be keen because they are trying to see at the quality of assets and the kind of categorization we are doing within the asset class and the kind of like structuring, restructuring we are doing in this. So after that, we will see a lot of investor interest. So hopefully, like once the plan is out in [upper domain], then like I think we'll have better interest in this. So we are confident that some resolution will happen.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [12]

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So sir, something can come up in the second quarter, the current quarter itself?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [13]

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Otherwise, it will slip to NPA this quarter. If we are not able to push through this management change before September, then we may have to classify it because actually June onwards, they have not paid the installments. So we have that issue. So we are trying to quicken the process.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [14]

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Understood. And sir, lastly on this thing also. What is our SMA-2 book, sir, corporate?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [15]

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The SMA-2 corporate book is still small. It is INR 2,596 crores.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [16]

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Okay. And what is the total SMA book, sir?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [17]

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Slightly moved up 10,919 because the retail and MSME SMA-2, even though it is not retail, in the slippage, you would've seen it, it is very low actually. Retail slippage this quarter also was INR 294 crores -- INR 297 crores. (sic) [INR 292 crores.] But then they come to SMA-2 very frequently. This is because of the repayment habit. [indiscernible] so a major portion is retail out of this 10,919. [4,628] crores is retail SMA-2.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [18]

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[4,620 crores] is retail?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [19]

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Yes.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [20]

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And sir lastly, what is our BB and below book? We have not provided a number. So...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [21]

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Which one?

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [22]

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BB and below book.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [23]

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BB, this time, I'll give you the number. The BB-rated and below. I'll give you the number. We can go ahead, when it comes, I'll...

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [24]

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Sure. I'll come back in the queue again.

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Unidentified Company Representative, [25]

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Slide 34.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [26]

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Slide 34 (foreign language)

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Operator [27]

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The next question is from the line of Mahrukh Adajania from IDFC.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [28]

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Sir, just again coming back to the DHFL resolution. There are so many parties to the resolution. There are bondholders. There are...

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Operator [29]

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Mahrukh, you are not audible [clearly, Mahrukh].

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [30]

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Yes, there is some echo happening, Mahrukh.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [31]

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Sorry?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [32]

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Yes, now I can hear you, able to hear you.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [33]

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Can you hear me yet? There are so many parties to the DHFL resolution. There are bondholders. There are retail NCD holders. And so you know, getting their consent although resolution plan is going to be a very time-involving process, right? So I mean do you think you will be able to resolve the account in the time deadline that you have?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [34]

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We are trying our best because it is in the best interest of everyone. Because actually, once the resolution now -- right now, there is no clarity for many of the stakeholders about the resolution plan. Once we have the resolution plan, which can be coming maybe a day or 2, so I think maybe the stakeholders, then they may agree once they actually look at the plan. That is a hope actually.

So some regulatory because inter-regulatory meetings are also we are pushing like the insurance regulator already come on board actually. Then if the SEBI comes on board, I think then the mutual fund also may -- actually, they're hinting if the SEBI approves, they will come and sign the ICA. Because in the given context, it is for everybody's advantage that we agree for a resolution plan. Otherwise, everybody will lose money. So it's in the interest of everyone. So once the resolution plan is put and once the regulator is on the same side, I think hopefully we should be able to quickly resolve.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [35]

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Any time line for the first part of the resolution to be put?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [36]

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Yes, actually. Like internally, we are -- actually, we wanted it in last week. But then somehow, certain discussion on some particular asset class got prolonged. So I think it's any day now. So time lines are like to build consensus before third week of August. And once the consensus happens, I think the investors will be coming. And even we are seriously thinking that the banks also can take, like, a [clear] stake. But then there is a loud thinking. If the investor is not coming because the management change is a must. So what we did in Jet, we can do here also. But anyway, unlike Jet, this is a business we know better.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [37]

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Okay. Got it, sir. Sir, and the other question is that other than your SMA, what will be your standard stressed corporate loans because there are so many loans that have been downgraded? So you have your SMA. But outside SMA also like DHFL and all that, still standard. They are not even SMAs. So...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [38]

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They are SMA now.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [39]

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Okay. But these -- there will be many others that are standard, right?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [40]

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Yes, but then the corporate except this -- I think maybe another case you can take Sintex. So -- but for that, I don't see there is a stress in the corporate book as of now. Actually, like, the numbers are sometimes looking big because of these power companies, which [comes to] SMA-0, SMA-1 because of these discom payment issues. But they go back. They will not slip actually, but then they come. So -- but then we don't put out those numbers because SMAs you know, [one and] the movements are quite frequent. So if you have access to CRILC data, you'll see a lot of movement actually. But then we put out SMA-2 because this is actually [60-days] default.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [41]

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Got it. But outside that, there'll not be any standard...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [42]

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Not much except the 2 names we are discussing.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [43]

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Okay. And sir, the other thing that I wanted to check is that in terms of the June 7 circular, what is your amount that is already under resolution?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [44]

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Actually, we are -- there are 23 ICAs signed actually. They have -- these are like...

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Unidentified Company Representative, [45]

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(inaudible)

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [46]

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Okay. Others are outside circular. But then this is the same process.

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Unidentified Company Representative, [47]

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Yes, same process. Yes, same (inaudible).

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [48]

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But then the amount, can we -- what is the amount under ICA? We'll be able to tell you that. So like as we go forward, we'll tell you.

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Unidentified Company Representative, [49]

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ICA [onwards is involved].

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [50]

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Because most of them are NPA actually, already NPA accounts as the provisioning is happening. I think maybe there are a few accounts which are SMA-2 or SMA-1 where we have [signed] this. [Whole] number, like, you -- you can go ahead and for other questions. So we'll give you that number.

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Operator [51]

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(Operator Instructions) We'll take the next question from the line of Roshan Chutkey from ICICI Prudential.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [52]

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This SMA-2 numbers at corporate book is about 2,800 crores. Is that right?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [53]

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[SMA] corporate book is 2,596.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [54]

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2,596 and this comprises of just 2 accounts?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [55]

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No, no, no. These are many, many accounts.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [56]

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And DHFL and Sintex is part of that?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [57]

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DHFL (inaudible) come under SMA-2 as of now.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [58]

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SMA-1, you mean? 1 -- 0 whatever.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [59]

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Yes, yes. 0 (foreign language)

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Operator [60]

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(Operator Instructions) The next question is from the line of Sneha Ganatra from Subhkam Ventures.

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Sneha Ganatra, Subhkam Ventures - Analyst [61]

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So just wanted to know on the resolution part. How much amount we're expecting on the recovery from the NCLT and overall recovery from the IBC cases?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [62]

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This year on the NCLT accounts, like, it is not only from the 1 and 2 list actually but from the overall NCLT because we have a INR 26,000 crores portfolio under the different NCLT stages. So we are expecting INR 5,000-odd crores of NPA to be settled. Out of that, the recoveries can be around INR 3,200 crores.

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Sneha Ganatra, Subhkam Ventures - Analyst [63]

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Okay. And what will be the run rate of the slippages we are expecting for next 3 quarters?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [64]

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Slippage, actually our guidance is 2.15 for the full year, and this quarter annualized is 1.77. We are on track, I think. So that is on the credit cost. Slippage side, yes, we're slightly overshot in this quarter, yes. Slippage wise we have slightly overshot. But then overall, we are keeping that between 3 to 3.5 delinquency.

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Sneha Ganatra, Subhkam Ventures - Analyst [65]

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Okay. And credit cost would be around 2% plus, right?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [66]

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2.15% and the first quarter is within the range actually. We expect that to be within that 2.15%.

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Sneha Ganatra, Subhkam Ventures - Analyst [67]

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And the credit growth for the next -- outlook for the FY '20 would be? Because this time credit growth has been little bit muted.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [68]

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First quarter generally, like you know, it is a dull quarter because the offtake will not be there much actually. So -- but then I think we retain that target of 9% to 11%.

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Sneha Ganatra, Subhkam Ventures - Analyst [69]

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Okay. And outlook on the margin?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [70]

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2.4% actually. The first quarter generally is a bit slow for us. So we will look at a NIM of 2.4% during the year.

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Sneha Ganatra, Subhkam Ventures - Analyst [71]

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When you're giving your guidance of the delinquency of 3% to 3.5%, you are including whatever the stress which you are [hearing] in the current scenario?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [72]

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Indeed, actually I have not factored DHFL, to admit, because like if that happens, that is beyond this. But for that, yes, everything is factored.

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Sneha Ganatra, Subhkam Ventures - Analyst [73]

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And what is the exposure of the DHFL?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [74]

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DHFL, my exposure is, fund based, can be around [2,500. Non-fund] (inaudible) around [2,700].

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Sneha Ganatra, Subhkam Ventures - Analyst [75]

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Okay. And any exposure to Indiabulls Group?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [76]

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We have, but we don't see any problem there. It is almost similar kind of exposure, but then we are not seeing any problem there.

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Sneha Ganatra, Subhkam Ventures - Analyst [77]

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And then the power sector, are we seeing some part of the resolution considering what is going on in the discoms as of now?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [78]

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I think there are 2 approvals which have already happened: GMR Chhattisgarh and Korba. Where the approvals have already happened and GMR Chhattisgarh, even the documentation is done. So these are the 2 accounts which will, I think, go out of NPA book in this quarter.

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Operator [79]

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We have a follow-up question from the line of Ankit Choudhary from B&K Securities.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [80]

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Sir, on the recoveries, we are seeing that from the NCLT, there would be [INR 2,300 crores] of recoveries. So...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [81]

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[INR 3,200 crores] recoveries dealing with about INR 5,000 crores...

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [82]

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(inaudible) Yes, so what is the overall recoveries we are expecting for the year?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [83]

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Actually, our internal recovery mechanism is aiming at a recovery of about INR 6,000 crores, plus the NCLT. The internal -- without NCLT, we should be hitting about INR 6,000 crores of recoveries. It will not happen in the first quarter because generally, first quarter is -- like, first quarter, I think, recovery upgradation is around INR 770 crores. So -- but then generally, we shoot above INR 1,000 crores. I think it can reach up [to INR 1,500 crores] per quarter. So we still keep that number. We will be reaching around INR 6,000 crores of recovery. Because a lot of compromises and other things have happened. And like we have given a generalized [scheme] of [INR 250] crores of compromised settlements. So a lot of traction is being built. It's all online settlements now. So I think maybe this quarter onwards, we'll see that number really improving. So overall, NCLT plus, our recoveries should be in the range of INR 8,000 crores to INR 9,000 crores this year.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [84]

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Okay. Sir, in the previous question you have mentioned GMR Chhattisgarh and Korba could go out of the NPA during this quarter. So wanted to know what is the exposure we have and how much we have provided on the same?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [85]

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Yes, we'll give you that number. Yes, Korba, our exposure is INR 272 crores and the provision held is [INR 68 crores] . So I have a gap of about INR 97 crores to make provision now because as per the settlement.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [86]

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Okay. So we are expecting...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [87]

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There is no write-back. Actually, this is minus INR 97 crores. Whereas GMR Chhattisgarh, exposure is almost INR 500 crores. The provision held is almost INR 200 crores. There is a write-back of about INR 12 crores. The provision is adequate there.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [88]

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Okay. Understood. And sir, what is the exposure we have in Sintex?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [89]

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Around INR 300 crores, INR 350 crores.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [90]

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Okay. And on the Lodha Group, sir? We have exposure over there?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [91]

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Lodha, we have some small exposures. Right now, I may not have the numbers because -- and then they are in different entities actually. So maybe offline, you can take the number.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [92]

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Sure. And 2 more exposures...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [93]

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[indiscernible] actually, we have not captured -- not very big exposure -- not very big exposures, so very, very small exposures, if you maybe like -- yes, it can be around 200 -- kind of [INR 200 crores] between 200 -- 150. Exact number (foreign language) but it is a very small exposure.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [94]

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Sure, sure, sure. And sir, 2 more exposures on this. Do we have exposure to Cox & Kings?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [95]

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No.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [96]

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No. And anything on the Radius Developers?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [97]

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We have a small LRD, which is below 200.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [98]

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Okay. And finally, sir, on this depreciation. So the depreciation provision has gone up. So we assume that it could be basically downgrade of this DHFL, [RADD] and other accounts, right? Do we have some investment exposure over there?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [99]

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(inaudible) the investment book. It is basically some of the debt converting to equity. I think that is maybe the reason. The investment book depreciation is -- huh?

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Monika Kalia, Union Bank of India - GM & CFO [100]

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Discoms.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [101]

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Discom bonds. UDAY bonds.

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Ankit Choudhary, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [102]

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So we do not have exposure in, let's say, DHFL, [RADD] in any form of investments?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [103]

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Actually, when I give the number, it includes the investment book also. I said about INR 2,500 crores fund based, which includes about [INR 250] crores of investment book also.

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Operator [104]

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The next question is from the line of Shreya Shivani from CLSA.

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Shreya Shivani, CLSA Limited, Research Division - Research Analyst [105]

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I just wanted the outstanding ARC receipt number for 1Q?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [106]

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This is the SRs?

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Shreya Shivani, CLSA Limited, Research Division - Research Analyst [107]

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Yes, the sale to ARC, the SRs, correct.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [108]

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Security receipts yes?

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Shreya Shivani, CLSA Limited, Research Division - Research Analyst [109]

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Yes. Correct.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [110]

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Receipts are around INR 919 crores, SR.

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Shreya Shivani, CLSA Limited, Research Division - Research Analyst [111]

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9-90?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [112]

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9-1-5. INR 915 crores.

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Operator [113]

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(Operator Instructions) Next question is a follow-up question from Roshan Chutkey from ICICI Prudential.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [114]

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My (inaudible) have been answered.

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Operator [115]

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We have a follow-up question from the line of Mahrukh Adajania from IDFC.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [116]

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Just wanted to reclarify, what is your exposure to the Reliance ADAG Group?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [117]

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I think last time, there was a similar question came up. In ADA Group, our exposure on Reliance Naval and RCom. Actually, these are the major exposures we had, which are already treated as NPA and now actually like [Infra,] our exposure is 127. Then [we draw how much is full.] Reliance Home Finance is, I think, below 100. Capital, we don't have -- I think it is some INR 9 crores of investment or something like that.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [118]

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Okay. And you have not lent to the promoter in any capacity?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [119]

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No, no, no, that we don't do.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [120]

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Okay. And sir, to the Essel Group of companies, including Zee, Dish, promoter companies...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [121]

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We have Essel Group exposure, but they're, I think, between INR 200 crores and INR 300 crores. Essel Group (foreign language) I will give you the number. Not really major but then, yes, we have exposure.

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Operator [122]

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The next question is from the line of Pritesh Bumb from Prabhudas Lilladher.

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Pritesh Bumb, Prabhudas Lilladher Pvt Ltd., Research Division - Equity Research Analyst [123]

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I just wanted to check our philosophy on the coverage ratio because our net NPA is now at about 7.23%, and if say DHFL and all they fall, that could put pressure on your provisions, we may go into loss again. And again, there's a PCA framework or Tier 1 also can come down. So how do you look at it? If you have on the provisioning side, what is the philosophy there?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [124]

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Yes, actually, on the negative side, when we look at it, yes, these are the accounts which can pull us down. But other positive side is that the SR definitely is going to happen in Q2. So because the parliament also done the amendment, so I think the legal process is almost complete now.

I think we can see this recovery in the month of August or max, September. So that is going to give me a substantial cushion. So as I already said, the NCLT process itself about INR 5,000 crores of gross NPA will come down, resulting in about INR 3,200 crores of recovery. These are the accounts, which are very close to resolution, which we listed.

Plus in that, actually, all these accounts if they materialized, there is a INR 1,300 crores of write-back happening. So I think that should be able to take care of Dewan Housing in the worst-case scenario. That is our call. Otherwise also this year, our ROA projection of 0.2, which actually looking at something like INR 900 crores to a INR 1,000 crores of profit for the year gives us sufficient cushion because actually, even if it slips, [there is a] 15% provision in the beginning. So I think we should be able to take care of that. I think it should not push us to losses.

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Pritesh Bumb, Prabhudas Lilladher Pvt Ltd., Research Division - Equity Research Analyst [125]

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Second was basically on this treasury gains, it looks like quite lower, what we are also witnessing in other PSU banks, generally the treasury gains are much lower than what we anticipated, maybe because of the yields falling down, but when we see there is no large treasury gains from the G-sec side, so there will be some bond side also problems. But then treasury gains is not that much. What is the gains which we can expect in Q2, maybe it's not in Q1?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [126]

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Yes, Q1, about INR 385 crores was the treasury gain from this. Actually, it is much higher than the last quarter. So maybe like -- because the investment book also is not that big, actually. But then we can -- if the same situation continues, maybe we will look at about INR 450 crores to INR 500 crores in this quarter. You're looking at the July trend.

Like the running numbers, what we see, so it can be higher than that also. But then I think it seems safe to assume INR 450 crores to INR 500 crores of treasury gains in this quarter, provided like the things continue more or less in the same way.

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Pritesh Bumb, Prabhudas Lilladher Pvt Ltd., Research Division - Equity Research Analyst [127]

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And also will we be sitting on some MTM gains, which we have not put it in our provision side, anything on that as well, so that you also pushing at provisions [indiscernible]

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [128]

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We have not factored that. Yes, that also may be a possibility.

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Operator [129]

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Next question is from the line of Rakesh Kumar from Elara Capital.

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Rakesh Kumar, Elara Securities (India) Private Limited, Research Division - VP and Analyst [130]

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Just a few questions. Firstly, on power sector. There is a lot of talk has been there that resolution is going to take place. But there has been a bit of a delay because of several reasons. So -- and again, we are getting to know that there is some resolutions that might happen. So just wanted to understand that how these things will progress for overall for the power sector, not about just 1 or 2 accounts.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [131]

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Yes. I think, see, the power sector as it is, the problem is well recognized and the provisionings have happened. So the resolution part actually, like is progressing a bit slow. Like, now the cases have hit NCLT and some are in ICA. So let us see, actually, because some of the resolutions, which we wanted outside the NCLT can happen actually. That process has started. But then having seen last 2 years, they're not very confident that this will happen. But the 2 accounts the way it has happened because [Adani] came in, both these accounts, it happened. So let us see. I'm also not very clear how it will shape up, but then anyway, recognition and provisioning side is happening. So not much risk left in this book as of now. If the resolutions happen, then it will be a write-back to us.

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Rakesh Kumar, Elara Securities (India) Private Limited, Research Division - VP and Analyst [132]

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Correct. So overall, on the private power sector side, what is the total outstanding that we have and how much we are provided on the entire book, which is NPA?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [133]

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Actually, on the total power exposure of INR 24,600 crores, PSU is INR 8,484, so that is all safe actually, it is about INR 16,139 crores to the non-PSUs. Out of that, INR 14,600 is for the generation. Out of the INR 6,512 is already NPA. So the provisioning level here can be around 60% -- 55% to 60% -- 56%.

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Rakesh Kumar, Elara Securities (India) Private Limited, Research Division - VP and Analyst [134]

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How much?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [135]

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56%. There was a question on the ICA. Actually, we have signed 23 ICAs and amounting to almost INR 12,000 crores, out of that, 17 are existing NPAs. 6 accounts amounting to about INR 5,400 crores are standard accounts as of now.

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Operator [136]

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We have a follow-up question from the line of Roshan Chutkey from ICICI Prudential.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [137]

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These 6 accounts where you're signing, where you're about to sign ICAs, the exposure is more than INR 2,000 crores [to the system.] And it's an SMA account...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [138]

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Half of it is 1 account. But you [have understood already.]

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [139]

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The power sector recognition. If you can just repeat it, sir? I missed the numbers.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [140]

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In the power sector, actually, like a non-PSU exposure is INR 16,100 crores kind of thing. Out of that INR 6,512 is NPA.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [141]

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And what about the rest?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [142]

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Others are standard actually. And they're, like, basically, like where the discom payments are happening, but then at a slower pace, but then they are all okay, so INR 6,512 is NPA and 56% is the provision coverage on these accounts.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [143]

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Remaining INR 10,000 crores you're comfortable?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [144]

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Yes, yes.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [145]

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And it's not a part of your SMA at all.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [146]

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It can be in SMA also because they are all depending on discom. Anybody depending on discom, like 1 month, 2 months are very normal delays. But then they're okay. They're there for last 2 years like that.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [147]

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Understood. And what is the -- what is your exposure to McNally Group.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [148]

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McNally was INR 120 crores.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [149]

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INR 120 crores?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [150]

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Yes.

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Roshan Chutkey, ICICI Prudential Asset Management Company Limited - Associate VP and Analyst [151]

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It is an NPA already for us?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [152]

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McNally, yes, already NPA. Somebody asked about Essel exposure. Essel exposure is actually INR 725 crores. But that includes some of the SPVs, the road projects and all that. Which are like -- as of now, there is no issue in that. It is not direct exposure to the Essel. It is as a group as a whole. So it has some road projects also within that.

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Operator [153]

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The next question is a follow-up question from the line of Pritesh Bumb from Prabhudas Lilladher.

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Pritesh Bumb, Prabhudas Lilladher Pvt Ltd., Research Division - Equity Research Analyst [154]

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Sir, just wanted to check what is there in this other retail assets, which has grown by about 46% and in last 2 years, it's almost like doubled in terms of loan book from INR 8,000 crores to INR 16,000 crores

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [155]

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Portfolio buyout. Portfolio buyout this quarter, we have not done much. Actually, the portfolio, yes. What exactly you want in that?

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Pritesh Bumb, Prabhudas Lilladher Pvt Ltd., Research Division - Equity Research Analyst [156]

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There is some INR 16,000 crores in composition of retail assets, that's about 27.8% of the retail. If you see the composition of retail assets. There's some others component, which has grown very substantially quarter-on-quarter also and year-on-year also and it has been growing for some time now for some quarters.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [157]

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Portfolio buyout is a strategy actually, like we do, and we are not seeing any stress in this book, actually. So -- but then I think maybe we'll -- right now, the details what you're asking. This actually has both MSME and Retail. Retail, mostly it will be mortgage and housing loans.

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Pritesh Bumb, Prabhudas Lilladher Pvt Ltd., Research Division - Equity Research Analyst [158]

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But what I wanted to understand is that there is housing and mortgage separately classified. So it will fall in that as well, right? So you mentioned some buyout separately, is that way?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [159]

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I think this data given is not very complete. It's a bit confusing. What you are trying to say here. Just a minute. I'll come back to you.

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Pritesh Bumb, Prabhudas Lilladher Pvt Ltd., Research Division - Equity Research Analyst [160]

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Sure. Second question was on this capital raise where your CET is almost like 8% and [though] Tier 1 is okay, but then have you asked the government for any capital?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [161]

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As of now, no, we have not approached the government yet, actually, because we are definitely looking at raising some capital on our own. We will wait for Q2 results because Q2 are supposed to be a bit of testing times. So hopefully, if we are sailing through Q2, I think Q3, we are definitely looking at some capital raising. Actually on the portfolio buyout, they have not put out any number. What they say is...

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Monika Kalia, Union Bank of India - GM & CFO [162]

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Others are 27%. It includes that portfolio buyout.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [163]

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Includes, out of that, what is the portfolio we have not said. because I think -- in retail, it is INR 1,920 crores of portfolio buyout, which is included in other retail.

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Pritesh Bumb, Prabhudas Lilladher Pvt Ltd., Research Division - Equity Research Analyst [164]

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Okay. So that is this quarter, we bought all or total?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [165]

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(inaudible) previous. Accumulative up to now, and this quarter, we have not done any portfolio buyout.

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Operator [166]

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Next question is from the line of Rakesh Kumar from Elara Capital.

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Rakesh Kumar, Elara Securities (India) Private Limited, Research Division - VP and Analyst [167]

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Yes. So just one small query. The discoms are now getting into their purchase of power. There are -- they'll be getting the LCs and all. So like how sustainable this thing is like. So I just wanted to understand, would not that impact their performance even more?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [168]

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See, discoms have to buy power, there is no other way. And at the central government level, there is a good appreciation of this problem, and there is a lot of pressure being built on the state government and discoms to open LCs and to pay these people on time and all that. Somehow the state governments are not listening, and the discoms are also not behaving. But then anyway, they need to buy the power from these people. There is no other way.

So I think it is only the tightening from the governments only can help us. At this point of time, we are stuck actually. There is a -- but then there is lot of meetings happening in the power ministry also on these issues, so we are trying to put pressure through that. So let us see because we have to live in this environment, we have no other way.

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Operator [169]

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Next question, a follow-up question from the line Mahrukh Adajania from IDFC.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [170]

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Just wanted one clarity. Do you have exposure to Vodafone Idea and Coffee Day?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [171]

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No.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [172]

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To neither, right?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [173]

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No.

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Operator [174]

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The next question is from the line of Chintan Shah from Elara Capital.

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Chintan Shah, Elara Securities (India) Private Limited, Research Division - Associate [175]

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Just had one question on the Mudra loan exposure, sir. What would be a total Mudra loan exposure and NPA percentage on that?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [176]

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Mudra is around INR 7,000 crores. NPA is around 9%. NPA is around 9%.

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Chintan Shah, Elara Securities (India) Private Limited, Research Division - Associate [177]

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Okay. And one more thing. On these MSME slippages, like we have the slippages in MSME have increased from 11.53% to 13.4% during the quarter. So any color on that?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [178]

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I think MSME slippages were slightly elevated during these 6 months, actually, the Q4 of last year and Q1 of this year. So I think it should start moderating now. This is basically because of the forbearance given earlier by RBI to the accounts which could not really pay the installments, so they slipped. So I think it should moderate, I think.

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Chintan Shah, Elara Securities (India) Private Limited, Research Division - Associate [179]

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Also lastly, are we seeing any concerns on the retail portfolio? Any stress in any of the vehicle finance or automobiles or unsecured lending? Any stress seen on that area?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [180]

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Actually, for us, our major retail portfolio is mostly mortgage-based, actually, retail and mortgage loans. We are not very strong on vehicle loan and personal loan. If you look at the composition, also it is a very small, actually.

I think the stress, even if it is coming, it will come from the personal loan first. So whereas -- like in our case, even the personal loans are mostly the PSUs where the salary linkages are there and that kind of thing. We are not very strong in doing personal loan to the private companies. We are not that strong. So I don't think, for our book, there will be any problem on the retail book.

Thank you. If there are no more questions in hand, any more questions?

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Operator [181]

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So we just have one question from Saikiran from Haitong Securities.

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Saikiran Pulavarthi, Haitong International Research Limited - Research Analyst [182]

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Just quickly on the liquidity at the system level. Just want to check, when we look at the PSU banks, are sitting with very high liquidity. What are the thoughts that at your end, in terms of the CD ratios for the bank as well as for the PSU banks? And how do you look at it? And the second question, sir, how are you looking at lending to the NBFCs considering there is a certain demand coming from that [indiscernible] sector, however, the risk aversion is there on the banking sector side.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [183]

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Yes. On the liquidity side, you are right. There is a lot of comfort, actually, we also have surplus and my investment book has gone up by 15,000 crores, if you see, in this quarter. So there is sufficient liquidity. And that is exactly the reason we brought the MCLR down on the short end actually. If you see, actually, we have made it very competitive for the overnight and 1 month and 3 months MCLR because this is some window to lend actually. There is some demand at that segment actually. So we will see some offtake happening in the short-term loans. So that is what we are driving.

So regarding NBFCs, there is a class of NBFCs, where there is no risk actually. We have lent, actually, you would have seen our book lending to NBFC has gone up a bit, actually, because these are like NBFCs, which are beyond any doubt. So we continuing our lending to these NBFCs. So there is good demand. As the things settle down, I think there will be -- even the second level, third level NBFCs will start getting activated. But at this point of time, we are restricting our lending to the top-line NBFCs.

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Saikiran Pulavarthi, Haitong International Research Limited - Research Analyst [184]

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Sir, just continuing because now the MCLR of your bank is competitive versus a lot of other banks. What kind of corporate credit you are comfortable with?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [185]

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Actually, we are looking at the short-term now. Because we have sufficient liquidity, we need to place at least INR 10,000 crores, INR 15,000 crores actually, quickly. So we are looking at the short end because there is some demand there. So -- but then they're at, like close to 1 month MCLR kind of things. So we are looking at that. This is coming from some top corporates and also some of the top PSUs, so that is where we are trying to play as of now.

Long term, yes, actually, it will come from the infra demand. The good construction companies, particularly these HAM projects and some of the gas distribution companies and all that, there are some sanctions happening now. So it will take time. But then, yes, there will be some offtake in the Q3, Q4, because this is -- at the non-fund base level now because they are taking guarantees and LCs now.

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Operator [186]

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Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for their closing comments.

Thank you, and over to you.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [187]

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Thank you. Thank you for all the questions. I hope we were able to clarify. This quarter has been like very transformative that way with a lot of changes happening. As for us also it was a bit dull quarter because Q1 generally is a bit dull because of -- at this time, there is the election-related activities at the branch level, and a lot of transfers, movements and all that.

So we hope that the projections, whatever we have given, we will be able to see that kind of traction in Q2, Q3, Q4. Thank you for all the cooperation. Like going forward, we will see a lot of action on the NPA recovery side. That is my expectation.

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Operator [188]

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Thank you very much.