Union Bank of India (UBI), which posted its highest net profit in 30 quarters at Rs 2,782 crore in the fourth quarter of FY23, aims to become the third largest public sector bank in terms of profitability by 2025.

“We will do business where we earn money for our stakeholders and the bank,” said A Manimekhalai, MD and CEO, in an interaction with BusinessLine.  

While a few retail and MSME (micro, small and medium enterprises) accounts are showing signs of incipient stress due to a sharp increase in lending rates, the UBI chief emphasised that they are backed by collateral and credit guarantee, respectively.

Manimekhalai expects higher recoveries than slippages this year also, with gross non-performing assets (GNPAs) dropping below 6 per cent of gross advances by March-end 2024 from 7.53 as at March-end 2023.

Edited excerpts from the interview:


How are lending rates moving in response to the cumulative 250 basis points repo rate hike since May 2022?

We have passed on the entire hike to our retail and MSME customers. In the case of corporate customers, the pass through to the marginal cost of funds-based lending rate (MCLR) has been 140 bps. 

Fifty per cent of our loan book is MCLR-driven; 24 per cent is benchmarked to EBLR (external benchmark-linked lending rate), and the rest is linked to base rate and benchmark prime lending rate. 

So, 50 per cent of our MCLR book will get repriced/ reset annually. Nearly 40-45 per cent of this book has already been repriced. In the current year, about ₹2.50 lakh crore of this loan book will be repriced.  

So, we are not seeing any decrease in the net interest margin (NIM). 

If RBI continues to be on pause, the kind of increases in EBLR we have seen in the last year or so may not happen. EBLR may stabilise. But our MCLR book will get repriced.  


How big is you corporate loan sanctions pipeline?

As at March-end 2023, our total advances were at Rs 8,09,905 crore, with the ratio of RAM (retail, agriculture, MSME) to corporate advances being 55:45. Our corporate loan book is growing. We have a healthy sanctions pipeline of about ₹35,000 crore. So, our corporate book, as well as the yield on that looks okay to me. So, we should be able to maintain NIM of 3 per cent at least. 

If we are able to maintain our cost of deposits, we don’t really have to increase our MCLR.


Your CASA (current account, savings account)declined to 35.62 per cent of total deposits as at March-end 2023 against 36.54 per cent as at March-end 2023. Will you be able to grow these deposits when fixed deposit (FD) rates are going up?  

CASA deposits moved into FDs because the latter got repriced... we have already seen FD rates decreasing in March by 50-70 basis points (bps). So, we will see moderation in deposit rates.  

CASA is not very rate-sensitive. It is only the service and the relationship  we maintain with customers that helps in building CASA.  

Though CASA ratio fell last year, in absolute terms we have been able to add ₹16,862 crore of CASA deposits in FY23. 

We are taking steps to increase CASA. We are taking a focused approach to grow these deposits. We have carved out a separate vertical for deposit mobilisation. Within that we have separate structures for payroll accounts, HNI customers and NRI customers.

We have a franchise of 8,580 branches across metro, urban, semi-urban and rural areas. Plus, we have coverage through nearly 17,800 business correspondents, who provide banking services in rural areas.  

We have about 14 crore customers, of whom about 7 crore are active customers. We will tap these active customers. 

Additionally, our digitisation journey is taking a good shape. Our ‘Vyom’ mobile app has 350 features and STP (straight through processing) journeys… So, there is a lot of activity around CASA, increasing the number of accounts, and building relationships. 


Why have you set a lower credit growth target (10-12 per cent) in FY24 vis-a-vis 13.05 per cent achieved in FY23?

We have moderated our credit growth target in line with market estimates. The analysts are looking at 13-15 per cent credit growth. We are open to grow beyond 12 per cent, which I’m sure we will do. Last year also we did that. We do expect a decent credit growth from the RAM segment. Last year, this segment grew 14.94 per cent. We will either see a similar growth or more  this year.  

In the corporate credit segment, we are looking at growth in sectors such as hybrid annuity model or HAM (road),  renewable energy, steel, textiles, chemicals, pharmaceuticals. There are 14-15 PLI (production-linked incentive) schemes from the government, and we will be part of that growth story. 


How is the growth in your gold loan portfolio?

We did very well in FY23. We achieved about 48 per cent growth in gold loans. The portfolio has grown to ₹50,165 crore as at March-end 2023 from ₹33,828 crore as at March-end 2022. We have added a good number of customers. Through them we will garner CASA and cross-sell other products. We have opened 1,331 gold loan points. These are part of our branches, but their key result area or KRA is only gold loans. 


What is your loan recovery target for FY24?

We did total recovery of ₹20,142 crore in FY23. Slippages were at ₹12,518 crore… In FY24, we expect recovery and slippages of ₹16,000 crore and ₹12,000 crore, respectively. GNPA target is less than 6 per cent.  

Last year, there was a good focus on written-off (WO) accounts. We recovered ₹5,549 crore from these accounts (against ₹2,750 crore in FY22). This effort will continue in FY24 also. Our portfolio of WO accounts is close to about ₹70,000 crore.