The Hindu Business Line : Union Bank may hike lending rate by 50 bps

Kolkata, Aug. 1 Union Bank of India might consider raising the prime lending rate by 25-50 basis points, according to Mr R. S. Reddy, Executive Director of the bank. The Asset-Liability Committee of the bank will meet within a week’s time in order to take a call on this.

The PLR of the bank is currently at 13.25 per cent. “The cost of borrowings is going up and there is a pressure on our margins. We will first analyse the impact of increase in Cash Reserve Ratio and deposit rates on our profitability before taking a decision on the percentage rise in PLR,” he said, speaking to newspersons on the sidelines of a seminar here on Friday.

Union Bank wants to sustain its net interest margin at the current level of 2.65 per cent. The bank targets a credit and deposit growth of 20 per cent in 2008-09. Small and medium enterprises and retail would be the main areas of focus for the bank, Mr Reddy said.

“Last year our SME portfolio grew by 40 per cent, this year it could be slightly moderated at 30 per cent .but we expect to do well in this segment. The ‘SME Saral’ initiative of our bank has facilitated direct processing and approval of credit proposals for SME clients thereby reducing the turnaround time,” he said.

Overseas expansion

Union Bank plans to open 10 branches overseas in the current year. According to Mr Reddy, the bank would look at setting up branches in Sydney, New Zealand, West Asia, London and Tanzania, subject to the Reserve Bank of India permission and approval from local authorities.

“It is difficult to gain margin in finely developed markets, so it would be better to look at smaller markets to begin with. We could also consider acquiring a small bank in order to build our business overseas. We, however, have to conduct due diligence before we decide on any acquisitions,” he said.

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