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Edited Transcript of UNIONBANK.NSE earnings conference call or presentation 10-Feb-20 12:30pm GMT

Q3 2020 Union Bank of India Ltd Earnings Call

Mumbai Feb 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Union Bank of India Ltd earnings conference call or presentation Monday, February 10, 2020 at 12:30:00pm 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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* Anand Dama

Emkay Global Financial Services Ltd., Research Division - Research Analyst

* Chinmay Desai;Anvil Share & Stock Broking Pvt Ltd;Analyst

* Jai Mundhra

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

* M.B. Mahesh

Kotak Securities (Institutional Equities) - Senior Analyst

* Mahrukh Adajania

IDFC Securities Limited, Research Division - Director

* Mohit Surana

CLSA Limited, Research Division - Research Analyst

* Rakesh Kumar

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

* Sushil Choksey;Indus Equity Advisors Pvt. Ltd.;Managing Director

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Union Bank of India Q3 FY '20 Earnings Conference Call hosted by Elara Securities Private Limited. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Rakesh Kumar from Elara Securities Private Limited. Thank you, and over to you, sir.

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Rakesh Kumar, Elara Securities (India) Private Limited, Research Division - Senior VP & Analyst [2]

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Thanks, Aman. Good evening, everyone. I welcome you all on the Union Bank conference call. We have on the line entire top management team from the Union Bank of India, led by Mr. Rajkiran Rai G., M.D. and CEO; Mr. Gopal Singh Gusain, Executive Director; Mr. Dineshkumar Garg, Executive Director; Mr. Manes Ranjan Biswal, Executive Director; and other team members. I would like to request CFO, ma'am, to read out the disclosure statement. And thereafter, we can start the call. Thanks, and over to you, ma'am.

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Monika Kalia, Union Bank of India - GM & CFO [3]

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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 [4]

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Yes, good evening. It is my pleasure and privilege to welcome you all to Union Bank of India Investor Conference Call on financial results for quarter ended December 31, 2019. This being our first con-call of 2020, let me wish you all a very Happy New Year and very happy and successful decade of 2020s. May we together achieve success in our chosen endeavors.

Coming to the bank's financials for quarter ended December 2019, Union Bank continued to progress well along the directions we shared at the beginning of quarter. The business and financials tell you a sustained pickup in efficiencies. As on December 31, 2019, global advances grew by 5.8% on an annual basis, while deposit registered a growth of 10.6% on an annual basis.

On a more granular basis, retail advances grew by 10% while CASA and retail term deposit contributed to the deposit growth. The bank noted an operating profit of INR 2,402 crores during Q3 of financial year '20, an increase of 7.2% sequentially and 32.7% on an annual basis.

The bank had some major recoveries through NCLTs this quarter. However, even adjusting for one-off gains, our performance on efficiency metrics is encouraging. The net profit stands at INR 575 crores during Q3, as against INR 1,194 crores loss in the previous quarter and a profit of INR 153 crores in the corresponding quarter a year ago. The provision coverage ratio stands at 67.42% as of 31st December.

Yield on advances improved by 12 basis points sequentially to 8.01%, while cost of deposits came down by 13 basis points to 5.53% for September 2019 quarter.

Net interest margin rose 12 basis points sequentially to 2.47%.

Cost-to-income ratio improved to 43.43% compared to 44.66% during previous quarter. Slippages during the quarter was INR 5,112 crores, which include about INR 2,269 crores exposure to 1 HFC. The bank noted marked gain in recoveries, including recovery of INR 328 crores in written-off accounts for the quarter.

Factoring in the development during the third quarter, our guidance for the financial year '19-'20 will be: credit growth to be 7% to 9% and deposit growth of 9% to 11% for '19-'20; NIM about 2.30; delinquency ratio in the range of 4.5% to 5%; credit cost around 3% and PCR at around 70%; cost-to-income around 46%; gross NPAs around 14% and net NPA around 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) The first question is from the line of Chinmay Desai from Anvil Shares.

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Chinmay Desai;Anvil Share & Stock Broking Pvt Ltd;Analyst, [2]

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Just on the DHFL account, what is our exposure? And how much have we taken this quarter? And what's the provisioning on that that we have right now?

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

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I think our exposure is INR 2,267 crores, and the provision as on date is 25%.

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Chinmay Desai;Anvil Share & Stock Broking Pvt Ltd;Analyst, [4]

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Sir, this would include even the investment exposure?

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

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Investment is separately being done. That's the -- actually, it doesn't include investment, but there also the provisions done as per the policy.

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Chinmay Desai;Anvil Share & Stock Broking Pvt Ltd;Analyst, [6]

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So what's the markdown you've taken there?

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Monika Kalia, Union Bank of India - GM & CFO [7]

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INR 250 crores, 25%.

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Unidentified Company Representative, [8]

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25% on investment group policy.

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Monika Kalia, Union Bank of India - GM & CFO [9]

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Yes.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [10]

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Yes, that also 25% you may take.

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Monika Kalia, Union Bank of India - GM & CFO [11]

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INR 250 crores.

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Chinmay Desai;Anvil Share & Stock Broking Pvt Ltd;Analyst, [12]

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Sir, if it's okay, could you share the exposure on the investment book?

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

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INR 250 crores.

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Chinmay Desai;Anvil Share & Stock Broking Pvt Ltd;Analyst, [14]

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Also sir, what was the chunky recoveries that we've seen this quarter?

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

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It was Essar Steel as like everybody had done it and then Prayagraj, then Ruchi Soya.

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Chinmay Desai;Anvil Share & Stock Broking Pvt Ltd;Analyst, [16]

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Okay. Sir, could you give the exposure, recoveries.

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

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Yes. I think...

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Unidentified Company Representative, [18]

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Essar INR 1,693 crores, sir.

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

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Essar exposure was INR 1,693 crores. Recovery was?

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Unidentified Company Representative, [20]

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Recovery was INR 1,930 crores, sir.

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

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INR 1,930 crores.

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Unidentified Company Representative, [22]

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And Prayagraj INR 231 crores in the recoveries.

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

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Prayagraj, there was a hit.

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Unidentified Company Representative, [24]

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Yes.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [25]

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Exposure was 500...

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Monika Kalia, Union Bank of India - GM & CFO [26]

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INR 543 crores.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [27]

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INR 543 crores. And recovery was?

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Unidentified Company Representative, [28]

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INR 231 crores, sir.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [29]

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INR 231 crores. And...

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Unidentified Company Representative, [30]

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Ruchi Soya INR 136 crores.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [31]

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INR 150 crores is the recovery?

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Unidentified Company Representative, [32]

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INR 136 crores.

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Monika Kalia, Union Bank of India - GM & CFO [33]

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INR 136 crores is the recovery, INR 240 crores is the outstanding.

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

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Yes. Okay. Essar outstanding was INR 1,693 crores, Prayagraj outstanding was INR 543 crores, Ruchi Soya exposure was INR 240 crores. So Essar recovery was INR 1,930 crores, Prayagraj recovery was INR 231 crores, Ruchi Soya recovery was INR 136 crores.

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Chinmay Desai;Anvil Share & Stock Broking Pvt Ltd;Analyst, [35]

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Sir, in the Essar Steel account, how much is the interest recovery?

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

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About INR 200...

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Monika Kalia, Union Bank of India - GM & CFO [37]

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INR 239 crores.

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

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INR 239 crores.

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Operator [39]

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The next question is from the line of Mahesh from Kotak Securities.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [40]

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I just wanted to check a couple of things as to -- on the -- for the fourth quarter, how are you seeing the recoveries and upgrades?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [41]

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Fourth quarter, actually, our recovery is expected to be around INR 3,000 crores-plus, actually. So that is coming from -- like, major accounts, we're expecting Bhushan Power and Steel. And there are a few more accounts which are very close to -- they seem like -- see Religare Finvest already approved by majority of the banks, so that has to be upgraded now. So -- then Jindal Thermal is another process which is going on. So -- where -- our bank has approved and few more banks are to do -- that also will be closed, in fact, and that will be done. Then, Anrak Aluminium is another case where we expect the recovery to happen. Alok has to be closed this quarter.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [42]

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Okay. Anything else on the power side, sir?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [43]

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Jindal is one, which is almost final. So I think in NBFC, there is only power because Korba is done, Prayagraj is done.

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Monika Kalia, Union Bank of India - GM & CFO [44]

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GMR Infrastructure is done.

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Unidentified Company Representative, [45]

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GMR Infrastructure is done.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [46]

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And sir then, Coastal Energy, do you have any exposure?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [47]

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We don't have exposure in Coastal.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [48]

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And this quarter, again, your slippages have come very large on the SME side. If you could just give us some color on what's happened there? Because even if you strip off INR 2,000 crores as a one-off from Dewan, the slippage is still quite high.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [49]

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INR 2,800 crores, so if you take that out, it is close to INR 2,800 crores. Actually, generally, our slippages will be between INR 2,000 crores to INR 2,500 crores because of the MSME. MSME, this quarter slippage is INR 1,121 crores. So if you take that, like, I think that's the major chunk, actually. Because agriculture also contributed INR 714 crores.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [50]

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Now specifically on the MSMEs because this number seems to be quite high.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [51]

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Yes. MSME slippages actually, like, are happening because, actually, -- but one thing, it is not only the small. Actually, there is some stress in the medium-size also. So -- actually, this number -- that's why we say conservatively that the -- there is no chunky account like the Dewan Housing Finance which happened this time, which we don't foresee in Q4. Q4, we don't see any chunky big NPA. But then the NPA slippage can be in the range of INR 2,000 crores to INR 2,500 crores. This will be the normal range, I think. It is purely because of MSME.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [52]

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Okay. And my final question, what will be your SMA-1 and 2, sir?

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

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SMA-2 is INR 10,300 crores. SMA-1, generally, we are not disclosing. So SMA-2 has come down. It is INR 10,300 crores. Out of that, corporate book is around INR 2,000...

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Unidentified Company Representative, [54]

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INR 2,100 crores.

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

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INR 2,100 crores. So the corporate, actually, we don't foresee any big ones now.

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Operator [56]

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The next question is from the line of Anand Dama from Emkay Global.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [57]

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Sir, we had NPA divergence for FY '19, which we had earlier reported. How have we treated that NPA divergence in this quarter?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [58]

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No. NPA divergence, we booked fully in the second quarter. So there is no divergence in this quarter. Because RBI report is annual, so only once they give that and that we fully absorbed in Q2. There is no spillovers.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [59]

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Okay. So even in provisioning side, we have done all the...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [60]

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Everything. Everything, last quarter, we absorbed.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [61]

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Okay. So nothing was there in this quarter?

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

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No.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [63]

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Sure. And sir, apart from that, any other large lumpy stress which is pending, which possibly could be sitting into our book at this point of time or something similar to DHFL or that size as such?

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

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No. Nothing, nothing.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [65]

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Sir, Air India, I believe, we had an exposure, some...

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

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No. We don't have.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [67]

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We don't have any exposure with that?

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

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Yes.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [69]

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And sir, on the discom front, basically, what's happening? So many of the discoms are still reeling under pain as of now, and I believe this year onwards, the UDAY bond repayment also will start as such. Sir what is happening over there? And whether there could be another bailout which can come for discom as such?

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

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See, discoms cannot be allowed to fail because that is -- because then the whole country will go to darkness. So I think the government is already working on that. That's what we understand. So hopefully, this will be resolved. Because one good thing with the discoms, in the last 3, 4 months, the payments of current dues are very up-to-date to all power generators. So old overdues are there which are getting resolved slowly, but the current dues are regularly paid. So that way, there is some substantial improvement in the working of discoms.

Yes, there is some pain in the discoms. So there are huge payments to be done and all that. So I think already some discussions are going, and you would have heard the government also speaking on that. So I don't think it will be allowed to fail.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [71]

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Sure. Sir that is certainly expected that the government will not allow them to fail. But sir, basically, what kind of bailout package that you feel that or maybe help that can actually come from the government side given that their own fiscal numbers are pretty stretched?

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

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I agree. But then, see, here, the issue is in the discoms, the operating efficiencies have to improve, like it is their billing and collection. That is the only area. So whichever discom is doing very well, on the billing and collection area, they will be out of the problem. So these are -- actually, here the state governments are -- have to come out and there should be some discipline there. Basically, they announced free power and all that. So -- and after that, they don't pay the subsidy amount to the discoms on time and that may be the reason, actually. So I think some discipline on that front will help because I'm as naive as you on this kind because what government is thinking I don't know. So let us see how it shapes up. Because these discussions are not taking place with us. So we don't know what is in their mind.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [73]

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Sure. Sir, what is our discom exposure?

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

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Our distribution PSC exposure is INR 4,600 crores. But they're all in good discoms, very selectively we are doing.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [75]

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Okay. Sir, anything that you will have in U.P., Rajasthan, M.P.?

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

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U.P., no; Rajasthan, no; M.P., also no.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [77]

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Okay. Anything in Tamil Nadu?

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

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Tamil Nadu electricity (foreign language) yes.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [79]

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Okay. Sir then this INR 4,000 crores split, if you can help me with like what...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [80]

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It is more on Karnataka, Orissa, that kind of states.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [81]

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Okay. There, you don't see any concern, except for, I think, in case of Karnataka?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [82]

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Yes, I think, even Karnataka is safe, actually. That way, we don't see a problem.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [83]

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Okay. And sir, this SME restructuring, again, has been on a higher side, slippages has also have been on a higher side for us. Where do you see basically the SME stress settling, sir?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [84]

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See, MSME -- like the restructuring is completed for the earlier part, what was announced earlier. So we restructured worth INR 1,026 crores in MSME.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [85]

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In this quarter?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [86]

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No. That is totally from the earlier...

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [87]

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Cumulative?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [88]

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Yes. Cumulative INR 1,026 crores because there is an earlier RBI announcement of January 2019, so -- which got completed. And we did INR 1,026 crores. It is not a very big amount, actually. So and then again, this announcement, we are waiting for more clarity. So what is the amount which will fall under the eligibility criteria and all that, we will see and then we'll be able to put out. But the stress in MSME sector is gradually because -- see, this was there for some time, but the recognition part is happening and it was a bit escalated in the last 2, 3 quarters because what happened whatever could not be restructured, they slipped. So I think it should moderate now.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [89]

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Okay. And sir, when can we have the swap ratios for the merger?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [90]

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Anytime now because we are waiting for the final guideline. So it can be anytime, but the process is on.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [91]

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Okay. Sir, in the preliminary due diligence basically anything surprising or on the negative side that you have seen in the books of...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [92]

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No, no. Nothing on that.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [93]

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Nothing. Nothing on the pension front or retirement liability and stuff?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [94]

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Like -- see, there will be a procedure called harmonization because actuaries generally are different, so there will be some minor differences here and there. So that will be taken care in the harmonization part, but then nothing major.

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Anand Dama, Emkay Global Financial Services Ltd., Research Division - Research Analyst [95]

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Sir NPA harmonization also had some impact or because basically, they had these -- some NPAs to be recognized and provisions to be made primarily because of these NPA harmonization among the banks?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [96]

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I think a bit premature to talk about it at this point of time because actually the harmonization part is not quantified yet, actually. It is in the process. It's a bit premature. So let us see because earlier like -- whether it has to be absorbed before March or it can be in the first balance sheet of June, those things have to be seen.

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Operator [97]

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The next question is from the line of Jai Mundhra from B&K Securities.

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

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Sir, in your opening remarks you mentioned that the net NPA to be below 6%.

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

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Around 6%, I said.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [100]

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Yes, okay, around 6%. But sir, I mean of course, there is a PCA threshold of 6%. So ideally, right, you should be moving to below 6% kind of a threshold. And if I do the just rough maths, it looks like you have to decrease your net NPA by around INR 2,500 crores to INR 3,000 crores, roughly in that range. You would have some slippages, additional normal slippages and then you said there are some recovery as well. So sir, first on -- 2 questions on this part, sir. One is the INR 3,000 crores kind of a recovery that you mentioned. But if I were to look at Bhushan and Alok, probably, they will be only having INR 800 crores to INR 900 crores kind of a recovery on realized basis. So what else do -- are you sort of factoring in the recovery?

And second, if the shortfall or if the net NPA reduction would be through write-off? So that is the broad understanding...

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

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No, this INR 3,000 crores I'm not including write-offs as of now because the write-off will have an impact on gross NPA, not on net NPA. So that's why we changed -- said that net NPA will be around 6%. It is not necessary, as of now, there's a thrust to threshold. I think this is a balancing act for me between -- like, see, for me, -- like I need to have a full year profit also. So that is another concern we have. So either you can make more provision and bring net NPA below 6% or have a full year profit. So this is something like -- is a choice.

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

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Understood, understood. Sure, sir. And sir, if you can specify this INR 3,000 crores of recovery, Bhushan, Alok are the 2 large cases. But anything apart from these, sir, where you have -- which could give you sizable recovery?

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

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I'll tell you, like, yes, Bhushan, the expected recovery is around INR 743 crores, Alok INR 104 crores, Anrak Aluminium INR 127 crores, and there are smaller accounts. Actually, like these are all NCLT cases, where we are expecting around INR 1,500 crores. Then we are expecting upgradations. Upgradations will just -- one of the -- Religare Finvest, that is already like approved now. So that will be upgraded. So -- and then my -- generally Q4, a lot of compromises which we have approved. Generally, the cash recoveries cross INR 1,000 crores in Q4, the small and medium ones. So we are expecting that all this will help us to, like, reach that INR 3,000 crores. It is recovery plus upgradation because that reduces the NPA.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [104]

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Sure, sir. Sure, sir. And second, sir, apart from Dewan, was there any other large slippages this quarter of around INR 700 crores, INR 800 crores?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [105]

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Next big one was INR 300 crores. Yes, INR 300 crores. Next big one was INR 300 crores.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [106]

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Okay. And which sector was this...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [107]

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Construction company and then there was a road of exposure of INR 150 crores. So like not very, very big. Actually, see, the total corporate slippage was INR 3,018 crores. Out of that, if you take out INR 2,260 crores, so it is hardly less than INR 700 crores, other corporates. So that will be the number we will be looking at as we go forward. So when I say the NPA slippage should be ideally between INR 2,000 crores to INR 2,500 crores, this is where we derive roughly our numbers.

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Jai Mundhra, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [108]

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Sure, sir. And sir, any visibility on this 5/25 restructuring book? Now so far, it has been very steady, but is it still some time before they come out of sort of a slated moratorium? Or they would start coming out of repayment -- the scheme?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [109]

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We don't foresee any problem in 5/25 accounts. Whatever to be slipped has slipped and whatever existing accounts, like -- see -- like, there is no pressure there. They are all very normal. Actually, behavior is very good.

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Operator [110]

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The next question is from the line of Mohit Khanna (sic) [Surana] from CLSA.

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Mohit Surana, CLSA Limited, Research Division - Research Analyst [111]

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This is Mohit Surana from CLSA. So what is the total quantum of interest income from recoveries that was one-off in this quarter?

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

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Only in case of Essar, no? It had INR 237 crores.

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Mohit Surana, CLSA Limited, Research Division - Research Analyst [113]

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Okay. Okay. Okay. And next question is your operating costs have declined quite a bit in this quarter. So I just -- if you can give some color on this?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [114]

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No. It is steady at the same level, I think, INR 1,800 crores?

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Monika Kalia, Union Bank of India - GM & CFO [115]

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Operating expenses, yes, INR 1,800 crores.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [116]

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It is not -- like -- I think it is around that level.

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Monika Kalia, Union Bank of India - GM & CFO [117]

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Same level.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [118]

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Same level.

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Mohit Surana, CLSA Limited, Research Division - Research Analyst [119]

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It is -- if I can see correctly, it is INR 978 crores, right, other operating expenses?

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Monika Kalia, Union Bank of India - GM & CFO [120]

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That's other operating expenses.

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Mohit Surana, CLSA Limited, Research Division - Research Analyst [121]

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Other operating expenses, apart from the employee cost. That is the cost...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [122]

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Okay. Okay. Yes, yes. Employee cost, we made some provision on the wage revision, some escalatory provision we made, INR 260 crores provision we made -- INR 265 crores. Generally, we used to make INR 60 crores per quarter. So now this quarter, we made INR 265 crores, so -- on the employee side. On the other operating expenses, it may be my ATM expenses which came down? Other operating expenses?

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Monika Kalia, Union Bank of India - GM & CFO [123]

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ATM -- the cost...

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

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Cost and ATM, I think, there is some curtailment of cost, I think. That I think we can give you offline also. Nitesh will give you the details where exactly it has gone down.

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Mohit Surana, CLSA Limited, Research Division - Research Analyst [125]

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Got it. And lastly, in terms of overseas business, you've shown quite a strong growth this quarter. So any color on that?

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

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Yes. This is owing to pre-Nirav Modi days, actually. Actually, we were very solid in these branches earlier, but then we are getting very good portfolios there. So we are taking exposures, very good corporates and good exposures. It is mostly, actually, not much of new businesses as such. It is basically sell down by other banks. Generally, that is how the international markets operate. So we mostly take short term where the maturity is below 1 year and that kind of thing. So the foreign banks and other banks, they sell down regularly. So we are taking that exposure. Since we have the cushion and where we have the margins, we are taking. So we are very steadily growing.

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Mohit Surana, CLSA Limited, Research Division - Research Analyst [127]

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Okay. Okay. And if I may squeeze in one more. Sir, I just wanted this data-keeping question, outstanding security receipts for this quarter and last quarter?

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

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Outstanding security receipts?

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Mohit Surana, CLSA Limited, Research Division - Research Analyst [129]

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Yes.

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Unidentified Company Representative, [130]

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INR 720 crores.

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

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INR 720 crores, INR 720 crores. So last quarter was...

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Unidentified Company Representative, [132]

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INR 920 crores.

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

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INR 920 crores. INR 200 crores has come down.

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Operator [134]

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(Operator Instructions) The next question is from the line of Mahrukh Adajania from IDFC.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [135]

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Sir, what is the total provisioning write-back from the provisioning line?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [136]

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In case of Essar only it was there. I think -- but then that goes below operating profit.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [137]

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Yes, yes. That's what I'm asking, provisioning, total provisioning write-back.

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

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Yes. So actually, like -- it would have gone for additional provisioning to NPA. So like it doesn't reflect on the operating profit side. About INR 800 crores of provision write-back would have come from Essar, roughly.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [139]

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And that's it?

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

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Yes. That would have, like, adjusted in the provision side, actually.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [141]

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Okay. And not from any other account, only INR 800 crore from Essar?

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

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Others are in the recovery in write-off accounts. Other 2 major accounts, actually, where the recovery came, so our write-off -- recovery in write-off account is INR 300...

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Unidentified Company Representative, [143]

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INR 327 crores.

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Monika Kalia, Union Bank of India - GM & CFO [144]

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INR 327 crores.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [145]

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INR 327 crores. So wherever, we have made 100% provision and written-off, that will go to the recovery in write-off and directly goes to the profit actually.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [146]

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So in the other income?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [147]

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Yes, other income.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [148]

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Got it. And sir, just one more question. You said that of your total other slippages other than Dewan on the corporate side, one was construction and the other was road, did you say road?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [149]

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Yes, yes, Dewan, yes.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [150]

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Okay, sir. Sir, and just one last question on the real estate side, RBI has given this DCCO dispensation, right, for 1 year, so have you been able to assess how much portion of your real estate exposure qualifies for this -- toward this, what percentage, like 20%, 30%, what percent?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [151]

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Actually, our real estate exposure is not that large. And as of now, we don't foresee any problem. But then we assessed about INR 700 crores of our exposure may become eligible under this RBI dispensation.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [152]

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INR 700 crores. Okay.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [153]

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They -- it is not that they need it, but then they may become eligible if required.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [154]

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Okay. And what would be your total real estate exposure?

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

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INR 3,800 crores, CRE exposure.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [156]

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INR 8,800 crores.

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

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No, INR 3,800 crores.

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Operator [158]

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The next question is a follow-up question from the line of Mahesh from Kotak Securities.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [159]

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Sir, just 2 more clarifications. On Religare, given the fact this will probably be one of the first few instances of an NBFC resolution, was there a public bond issue as well in this?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [160]

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No. This is a healthy group take over, actually.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [161]

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No, I'm just trying to understand from the other side. When you're marking down the debt, how was the resolution from the NCD side?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [162]

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Okay. Actually, for the NCD holders?

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [163]

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Yes, I'm just trying to...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [164]

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Haircut was uniform for everyone.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [165]

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Whether you are secured, unsecured, it really didn't matter?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [166]

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Actually, yes, it didn't matter because actually does -- here, actually, we didn't have that public deposit issue, I think. Actually, wherever we have public deposit, we have this problem. Otherwise, the NCD holders and lenders are almost similar. So they're, actually, coming to an understanding doesn't, like, create a problem.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [167]

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Perfect, perfect. So this is one thing. Second one is that on the earlier question on real estate, just one clarification. If an account has been classified as NPL under the restructuring norms of the DCCO being not completed with -- for the clause of DCCO completion, can you now upgrade the asset?

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

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No, I don't think so. This is our accounts, which are standard as on the day of restructuring.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [169]

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No, no. Let's assume that...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [170]

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If the account is already NPA, it will continue as NPA even if you extend the DCCO.

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M.B. Mahesh, Kotak Securities (Institutional Equities) - Senior Analyst [171]

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Okay. So it has to be standard?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [172]

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Yes, it has to be standard on the date of debt.

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Operator [173]

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(Operator Instructions) The next question is from the line of Rakesh Kumar from Elara Securities.

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Rakesh Kumar, Elara Securities (India) Private Limited, Research Division - Senior VP & Analyst [174]

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Sir, just one question I had, like this time, interest accrual, like total interest income on advances, like not looking that high, so was the reversal also because of this MSME and agri loans slippage this time?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [175]

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Reversals are there every quarter. This time also it is around INR 200-plus crores. I think we can give that number. So reversals are there every quarter.

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Rakesh Kumar, Elara Securities (India) Private Limited, Research Division - Senior VP & Analyst [176]

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Yes. So was it like relatively higher on securities...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [177]

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No, it is almost similar to last quarter.

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Rakesh Kumar, Elara Securities (India) Private Limited, Research Division - Senior VP & Analyst [178]

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Around INR 200 crores of total reversal.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [179]

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Yes, I think. Yes, reversals are there, actually. We can share that number. It is almost stable, actually.

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Operator [180]

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

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [181]

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Sir, just on this real estate thing, I just -- I don't know if you have an answer. Sir, any idea why this has been notified only for banks and small finance -- commercial banks and small finance banks and not NBFCs who are more in need of this?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [182]

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I also have no idea because this should have been ideally extended to NBFCs. I agree with you. But...

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [183]

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So they can change it or no?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [184]

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I don't know because initial, like, discussions -- because actually, banks do not have many issue with the commercial because we are not a major lender. Our exposure is mainly through the NBFC. So I agree with you, it should have been given to NBFC. It has not come. Let us see whether there is any rethinking on it.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [185]

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But, sir, they'll have to refile the circular, is it? I mean they'll have to reissue the circular? Or how does it...

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [186]

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Actually, they have to extend to NBFC, but whether they're in a mood to do that, RBI would have already examined it before they said it. So I -- like, I don't know whether they will do it or not. But then, it will be a great relief if they do it for NBFC.

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Operator [187]

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The next question is from the line of Sushil Choksey from Indus Equity Advisors.

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Sushil Choksey;Indus Equity Advisors Pvt. Ltd.;Managing Director, [188]

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Sir, just needed a little update more on a merger point of view where HR and technology concerned? And are we on track for 31st March, 31st April as a combined bank?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [189]

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Yes, we are fully prepared. Actually, that we -- our preparedness is up-to-date because on the technology side, actually, all the engagements have happened. So including the consultants and talking with the Finacle, that is, Infosys, all that, we are prepared, actually, for the day 1. And on the HR side also most of the policies are already getting approved now. So we are harmonizing the policies between the 3 banks and all that because there are several committees formed at GM level, ED level and all that. So I think our preparedness is up-to-date.

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Sushil Choksey;Indus Equity Advisors Pvt. Ltd.;Managing Director, [190]

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Sir, but to complete the entire exercise between now and 31st March, there is less than 50 days left.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [191]

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See, on the technology side, what will happen is the work will start. There is a -- like Bank of Baroda, there'll be one system available in all the banks, all the 3 banks -- branches where they can go and operate and get some basic services. Like, in my case, Andhra Bank can -- Andhra Bank customer can walk into Union Bank and get some basic services. Some 12 services are listed under that. That basic services, which is 90%, 95% of the customers use. So they will be able to transact. But getting the technology platform together, all the 3 banks, this should take anything between, like, 9 to 12 months.

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Sushil Choksey;Indus Equity Advisors Pvt. Ltd.;Managing Director, [192]

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And do you estimate the accounting provisions or NPA management and all this will be aligned as of 31st March for all the balance sheets together or you'll have to look at it after the merger happens?

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [193]

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No. In that way, we are continuously looking at it. There is a lot of study which is happening. But the quantification part, actually, that way, the data and all that is all available. So we'll look at it like one -- actually, now the first step is the swap ratio announcement because that is a legal process where SEBI and other things are involved. So we are waiting for that. As soon as we get a go ahead for that, so once that is done, other things, we are in good control. I think that should not be a problem.

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Operator [194]

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Ladies and gentlemen, due to time constraints, that will be the last question for today. I'll 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 [195]

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Yes. So thank you very much. I think -- thank you to the community who are the analysts and the investors, the way you participate. And we also try to transparently provide the information. So this quarter, if you look at it, even if you take the one-off transactions of Essar, I think the bank has done very well. The operating efficiencies are very steady, like the growth projections and other efficiencies are as planned. So as we go forward, like, we are looking at further consolidating again. So thank you. Thank you for all your cooperation. So hopefully, the merger process also should not disrupt our -- the efficiencies what we have already built. So we are planning accordingly. So like maybe as we get certain clearances, we come out transparently -- more transparently on those dates and other things. Until then, goodbye, and thank you.

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Operator [196]

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Thank you very much. Ladies and gentlemen, on behalf of Elara Securities Private Limited, that concludes today's call. Thank you for joining us, and you may now disconnect your lines.

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Rajkiran Rai Gundyadka, Union Bank of India - MD, CEO & Director [197]

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Thank you.

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Operator [198]

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Thank you.