UCO Bank gets extension to meet provision coverage ratio

After ICICI Bank and SBI, UCO Bank has got some leeway from the Reserve Bank of India (RBI). CNBC-TV18 learns that the RBI has given the public sector lender a six-month extension, up to March 31, for achieving the 70% provision coverage ratio, reports CNBC-TV18’s Vidhi Godiawala.

Certainly good news coming in there for UCO Bank, what we are picking up from our sources in the regulator and RBI is that they have been given a six months extension to reach the 70% provision coverage ratio by March 2011, instead of September 2010.

What is provision coverage ratio? It’s the amount of money a bank keeps aside for its bad loans or its non-performing assets.

Now, UCO Bank has been given the extension till March 31, 2011 to reach this, so now they have to provide only Rs 400 crore to reach 70%. Currently, as on first quarter of FY11, their provision coverage ratio was 58.64% and their gross NPA stood at about Rs 1,929 crore. They had sought extension for one year till September 2011, but that has come in only for six months is what our sources are telling us.

Also, the bank says that more NPAs could come up through the course of the year and that Rs 400 crore could actually increase, but that will come only through the course of the year as the bad loans increase. However, the bank says that they have not received any intimation from RBI as yet on the extension provided to them.

Now let me take you back SBI has got one year extension till September 2011 and ICICI Bank has got an extension by six months till March 2011 and Laxmi Vilas Bank, which is another bank has sought extension from the RBI, but there has been no intimation. This extension for UCO Bank will only help them provide in a more systematic manner and it will be less strain on the balance sheet since these provisions come directly from the profits of the bank