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UCO bank to gain by US sanctions

UCO bank to gain by US sanctions

UCO Bank is set to benefit from the sanctions imposed on Iran’s oil exports by the US Government. The bank could benefit from the extra cash that would be generated from the Indian oil refiners dealing with Iranian oil imports. The move is a shot in the arm for the Kolkata based bank which has been struggling under NPA’s, which amounted to Rs.31,121.79 Crores as of December 31, 2018. According to the CEO Atul Goel, this can add Rs.800 Crores to the annual earnings of the bank.

WHY IS IT BENEFICIAL FOR UCO?

In 2012, during the UPA II regime, UCO was chosen as the payment bank for any import of Iranian oil because of its strong domestic presence in the country. Being primarily involved in the domestic market, the bank was cushioned from any upheavals from the volatile oil trade at the international level. Since the US sanctions have been placed the bank is profiting from the extra cash they have gathered, the amount is supposed to be as high as Rs. 800 Crores. The money is also at zero-interest which only adds to the profits of the bank. The bank had earlier witnessed a sharp decline in profits when former US President Barack Obama signed the Iran Nuclear Deal in 2015 lifting the oil sanctions.

Although, this decision may be advantageous for UCO Bank the move has drawn a lot of flak from world leaders all around the globe because Iran has been following the rules of the earlier deal and it is the US which has abruptly pulled out of it.

Since, the bank has been struggling under the weight of huge bad loans, it had chalked out a ‘Prompt Corrective Action Plan’. This plan entails that lenders will not be allowed to borrow any more loans from the bank until and unless they mend their balance sheet. The plan had been enforced by the RBI. This imposition of sanctions will give the bank some room to think and plan for the future. 

According to the government’s capital infusion scheme UCO Bank will also get an additional sum of 33 Billion Rupees by March 31.

 With these flurry off good news the bank looks to be in a comfortable position for now, but the problems the bank has are too huge to be solved so soon.

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