The Hindu Business Line : UTI Bank expects 30 pc credit growth

UTI Bank has grown to become active in the `loan syndication' market, arranging loans for companies that want to borrow. Its fee income has also gone up commensurately.

Mr P.J. Nayak

Chennai , March 11

UTI Bank expects to close the year with a credit growth of 25-30 per cent, thanks to a pick-up in corporate lendings in the fourth quarter, the bank's Chairman and Managing Director, Dr P.J. Nayak, told Business Line today.

As at March 31, 2003, the bank's net advances stood at Rs 7,180 crore. A 30 per cent growth would then translate to around Rs 9,300 crore, or about Rs 1,000 crore more than the net outstanding credit at the end of the first nine months of the current year.

Dr Nayak was here in connection with the opening of a branch at Purasawalkam.

Asked if Indian companies raising loans abroad would affect Indian banks' credit growth next year, Dr Nayak said it would not. The companies that are good enough to borrow from abroad anyway do not take much loans from Indian banks. And even when they do, it is at such fine rates of interest that "we don't make any money on them."

On the other hand, the companies going in for overseas loans give banks like the UTI Bank opportunities to earn fee-based income.

UTI Bank has grown to become active in the `loan syndication' market, arranging loans for companies that want to borrow. In 2001-02, it arranged loans of Rs 3,700 crore and Rs 8,200 crore in the next year. In the first nine months of the current year, the bank arranged loans of Rs 16,349 crore.

The bank's fee income has also gone up commensurately, from Rs 97.62 crore in 2001-02, to Rs 143.77 crore in 2002-03 and to Rs 123.91 crore in the first three quarters of the current year.

UTI Bank's retail assets — loans given to individuals and small traders — have also grown at a similar pace. The bank expects to end the current year with a retail asset portfolio of Rs 2,100 crore, compared to Rs 247 crore in 2001-02.

This growth has come about through three avenues — loans acquired from the market through securitisation route, loans co-financed and advances given directly by the bank.

But in the case of loans portfolio purchased and co-financed, some other entity does the loan origination. In other words, the assessment of the borrower is done by some other entity. How comfortable is the bank with this model, where others assess the credit-worthiness of the borrower?

Responding to this question, Dr Nayak said that the bank purchases loan assets after they are credit-rated by a rating agency.

He said that leaving aside home loans, other retail assets such as vehicle and consumer durable loans typically mature for repayment in about three years. UTI Bank has been buying retail assets in the last two-and-a-half years and the experience has been "very good."