According to Union Bank of India MD and CEO Rajkiran Rai G, 2018 is likely to be a better year than the one that is coming to a close when it comes to credit growth. The retail and infrastructure segments will drive credit growth, said Rai, who took charge of the public sector bank in May 2017. In an interaction with BusinessLine , he emphasised that PSBs should single-mindedly focus on growth and resolution of stressed assets. They should not venture into amalgamation/merger in the next two years, he observed. Excerpts:

What trends do you visualise on the credit front in 2018?

Our retail loan growth (at more than 20 per cent) is good even now. And, in the infrastructure sector, particularly in the roads (hybrid annuity model) segment, we are seeing credit pick-up. Overall, our loan growth is about 10 per cent. We expect 10-12 per cent loan growth in 2018 (calendar year).

Besides roads, there is lot of activity in the gas pipeline segment. Re-pricing and refinancing of completed infrastructure projects is also happening. And consumer credit, particularly retail housing and mortgages, should grow at a good pace next year.

We are not seeing any new investment (large capital expenditure) as of now. But then gradually this will pick up next year because (stressed asset) resolutions are also picking up pace. That will lead to these assets getting into stronger hands.

There is a distinct slowdown in deposit growth. When will this trend reverse?

At this point of time we are comfortable (with the deposit accumulation) as credit growth is also not very strong. So, the normal deposit accumulation, extra statutory liquidity ratio investments and other investments should take care of credit growth as of now.

But going forward, banks will have tougher competition (for garnering deposits) as deposit rates have come down to around 6 per cent. So, that actually has affected deposit growth. And with systematic investment plans of mutual funds taking off, we are seeing a distinct trend of retail money getting into capital markets through this route and with good returns.

I think deposits rates may increase going forward. However, I am not seeing this happening for at least the next two quarters. After that it will depend on the trend — if credit offtake gathers steam then we may need deposits. Then deposit rates may go up at that point of time.

Given that at least half the PSBs are under the prompt corrective action framework and many are also reeling under bad loans, do you think amalgamation/merger among PSBs is advisable?

I think in the next two years we should not venture into this because we are in a consolidation phase. After the banking system was shaken up (due to the asset quality review), resolution of large stressed accounts are in the offing. So amalgamation/merger is a distraction for me. What we actually need now is growth. The capital that the government will bring in will help us grow faster and create more economic growth. I feel that at this point of time, our focus should be single-minded devotion to growth, using capital in the right way and resolution of stressed assets.

Can you throw some light on your bank’s Vision 2020?

We want to be fully digital by 2020. We want to have a traditional and, on the parallel, fully digital Union Bank. In India, branch banking and personal touch banking is not going to go away that easily. We will continue to have that kind (brick-and-mortar) of presence but the incremental business which will come from the younger generation will move to the digital platform. We need to design our products and get our people up to speed in this regard so that customers can be served better.

Now, in banking, suppose a customer wants a loan, the general tendency is that the manager will call him. He will need to visit the manager once or twice, discuss it with him and then the loan is sanctioned. Now, suppose a customer applies for a personal loan through the bank’s website, the scrutiny will happen digitally through available information and in a couple of hours we will convey to the customer that the loan is approved. Then one of our officers visits the customer, completes the documentation, and the next day the customer’s account is credited. So, this is a cultural shock for us (PSB employees) as we are not accustomed to this. Hence, we need to train people to handle these kind of things. That is exactly what we are trying to do. This is very important in the times to come for the banks to survive.

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