The 95-year-old Mumbai-headquartered Union Bank of India, which has around 3,900 branches across the country, has deployed technology extensively in banking services. Recently, the state-owned bank launched ‘tabulous banking,’ a tablet-based account-opening process, which the bank’s Chairman and Managing Director Arun Tiwari, in an interview with BusinessLine , termed a huge success.
Tiwari, 57, who took up the reins in December last, says the financial inclusion policy is a big opportunity for public sector banks as it will help them go deep into the countryside and improve their bottomline. Tiwari is positive about the economy which he said would pick up “during Q3 and Q4 this financial year.”
I don’t want to comment on this because the CBI has only got technical evidence of corruption. But, as for non-performing assets (NPAs), complex issues are involved. Many of these issues are beyond banks’ control.
Look at infrastructure — don’t you think we need a lot of roads, ports, power stations and other infrastructures? But a lot of such projects for which banks have given big-ticket loans are stalled because of the long delay in clearance.
There are around ₹3-lakh crore locked in these projects.
The majority of the projects are in the power sector. How will the companies repay the loans when the projects are stalled? And the economy has not been doing well, too.
Your bank too has a high volume of NPAs — over ₹10,000 crore — and the gross NPA ratio is more than 4 per cent (and just 20 borrowers account for an NPA of ₹3,350 crore). Your take on this.
We are narrowing the ratio. In the next couple of quarters, I hope there is going to be a shrinking of the NPA volume. Most of the large loans are well secured, and the big-ticket borrowers have huge assets on the ground. So, we are not very worried.
What is the basis for your optimism?
The economy is going to do well during Q3 and Q4 of this financial year. It has already started looking up.
The stalled infrastructure projects, I hope, will soon get clearances and get moving. Fortunately, we now have decisive governance. The Finance Minister has given focused, precise instructions to bank heads. We have been given a clear roadmap. I’m sure, by Q3-Q4 the banking sector will be back on track. Recovery is faster. There are some green-shoots already.
Another important aspect is the financial inclusion (FI) policy. FI is a big game-changer for the banking sector. It is opening up a lot of opportunities for the sector.
Commercial banking will go to the distant villages — this will mean more deposits, more micro-financing, more cash flows and more revenues for the banks. This will give a boost to the economy.
We have already covered over 33,000 villages out of our target of 34,000 under FI.
In view of the NPAs, are you going slow on big infrastructure loans?
We do give infrastructure loans. But now we focus on retail, agriculture and MSME (micro, small and medium enterprises) lending.
This is our ‘RAM’ lending strategy. Delinquency is lower in smaller loans, returns are higher and competition is lesser. About 45 per cent of our total loans is for this sector.
And, 68 per cent of our incremental loan in the first quarter of this financial was to MSMEs. The FMCG (fast-moving consumer goods) market is growing fast, fuelling the need for more small loans.
Union Bank is big on technology. Your comments.
We have the best IT platform in the industry. Nearly 67 per cent of our transactions are e-transactions.
All our branches and ATMs are linked to core banking.
We are the first public sector bank to have launched ‘tabulous banking,’ a tablet-based savings bank account opening process, whereby the bank goes to the customer’s doorstep to offer services.
It’s a huge success. And, while many other banks’ ATMs are running at a loss, ours are not. We are big on technology and are going to expand our IT platform.
What about plans for going in for qualified institutional placement?
We are not in a hurry as we don’t need the money immediately. We are waiting for the right market conditions. We have the permission to raise ₹1,386 crore through the QIP route.
You don’t seem bullish about branch expansion.
Well, we are not very aggressive. But, in the last financial year, we opened 340 branches. We already have 3,900 branches and we have a very good geographical spread across the country.
What are your priorities for the next three years?
Before I step down in three years, I want to raise the bank’s ROA (returns on assets) to 1.25; ROE (returns on equity) to 19-20; and NIM (net interest margin) to three plus. I want the loan portfolio to grow, too.
Union Bank is viewed as a conservative bank…
We are not conservative, we are prudent!