Union Bank of India (UBI) plansto increase the proportion of low-cost current account and savings account (CASA) deposits in its overall deposits to about 40 per cent by March-end 2023 from 34.6 per cent as of September-end 2020. This will help the bank improve its net interest margin (NIM).

Simultaneously, the Mumbai-headquartered public sector bank (PSBs) is seeking to bring down the proportion of bulk (term) deposits (of ₹2 crore and above) in the overall deposits by not offering special interest rates.

UBI’s focus on CASA comes in the backdrop of its net interest margin (NIM) declining to 2.51 per cent as of September-end 2020 against 2.68 per cent as of September-end 2019.

NIM (excess of interest income over interest expense divided by average interest earning assets) is one of the indicators of a bank’s profitability.

Rajkiran Rai G, MD and CEO, UBI, said: “Banks with large presence in the North and the East have higher CASA deposits. Typically, South-based banks have relatively lower CASA deposits.”

Referring to this pattern, he observed that this probably has got something to do with better funds management by customers in the South.

PSBs merged with UBI

Rai emphasised that Andhra Bank and Corporation Bank, the two South-based PSBs that merged with UBI with effect from April 1, had lower CASA than UBI.

For example, as of December-end 2019, CASA deposits constituted 34.4 per cent of UBI’s overall deposits. CASA in the case of Andhra Bank and Corporation was at 32.77 per cent and 28.67 per cent, respectively.

Punjab National Bank (PNB), which has a vast branch network in the North and is now strong in the East as well following the merger of United Bank of India with it, had a CASA ratio of 44.10 per cent as of September-end 2020.

Along with United Bank of India, Oriental Bank of Commerce (a predominantly North-based PSB) was merged with PNB with effect from April 1.

“If you compare our bank with Canara Bank, we are almost similar,” said Rai.

In the case of Bengaluru-headquartered Canara Bank, CASA deposits constituted 32.77 per cent of its overall deposits as of September-end 2020.

Manipal-headquartered Syndicate Bank was merged with Canara Bank with effect from April 1.

Rai expects UBI to end the current financial year with a CASA ratio of 36 per cent; 38 per cent by March-end 2022; and 40 per cent by March-end 2023.

The proportion of bulk term deposits in Union Bank’s overall deposits came down from 24.1 per cent as of June-end 2020 to 23 per cent as of September-end 2020.

‘To expand network’

“Depending on the opportunity, we will further expand our network in the North and the East. Keeping this in mind, we have opened many new regional offices.

“These offices will weigh the business potential (to garner CASA as well as lend) in their respective regions to open more branches,” said the UBI chief.

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