The Hindu Business Line : Banks should balance interest rates, rising NPAs: Goel

Kolkata, July 21 The Reserve Bank of India might announce a further hike in cash reserve ratio and repo rate in its quarterly credit policy next week in order to rein in inflation, according to Mr S.K. Goel, Chairman and Managing Director, UCO Bank.

According to him, India has to withstand global uncertainties arising out of global economic changes. “Developed economies such as the US are also feeling the pinch of rising inflation, how can India remain insulated from it,” said Mr Goel addressing the Banking Conclave 2008, organised by FICCI (Federation of Indian Chambers of Commerce and Industry), here on Monday.

Talking about the impact of the present scenario of inflation and interest rates, Mr Goel said the Indian banks might witness a major setback in profitability in 2008-09 and there could also be an increase in non-performing assets (NPAs). Banks would need to strike a balance between increasing interest rates and curtailing the rise in number of NPAs, he said.

To float subsidiaries

UCO Bank, according to Mr Goel, plans to float subsidiaries for its insurance and mutual funds business and is scouting for a foreign partner. UCO Bank will have 49 per cent stake in the subsidiary, the foreign partner will hold 26 per cent, while the rest will be held by some corporate entity or a private bank, he said.

“The company will look at promoting all kinds of financial products and also give insurance broking, advisory and loan syndication services. We hope to put everything in place by September this year,” he said. The subsidiary will help boost the bank’s fee-based income to a great extent, he added.

Operation Recovery

UCO Bank, he said, would focus on recovery from NPAs and written-off accounts this year. The bank has recovered Rs 180 crore this quarter. “We plan to scale up our recovery operations and arrest fresh slippages in order to boost our profit this year,” said Mr Goel. The bank aims to achieve about 80 per cent growth in net profit at Rs 750 crore this financial year. The net profit for the year ended March 31, 2008 stood at Rs 412 crore.

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Banks should balance interest rates, rising NPAs: Goel