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Even as it awaits an uptick in demand for corporate loans, Union Bank of India is betting on, what it calls, the RAM (retail, agriculture and MSME) segments to achieve its loan targets in the near term.
Amid the overall slow growth in credit offtake in the industry, UBI is confident of achieving its projected growth of 9-10 per cent in advances by the end of this fiscal.
“Whatever growth guidance we gave in the past three years pertaining to advances and deposits, we have achieved those numbers. This year too, we will achieve our targets and our growth will predominantly come from the RAM sectors,” Arun Tiwari, Chairman and Managing Director of UBI, told The Hindu Group of journalists here.
Loan book
The RAM segments’ share was about 45 per cent of the bank’s domestic loan book 18 months ago. During the December quarter of the current fiscal, the share increased to 55 per cent. Also, the average growth of the RAM sectors was 13.5 per cent against the loan growth of 5.3 per cent in the quarter. With 62 per cent of its branches located in semi-urban and rural areas, the bank sees the share of RAM in its loan portfolio increase to about 60 per cent in a year’s time. Tiwari explained that the number of clients in the RAM segmentshas been increasing, and it offered better returns with less risk weights. Also, the capital requirements are lower in the RAM sectors. “As a consequence of RAM focus, our net interest margins are also better,” he said, adding that the bank “gets bigger opportunities to cross-sell financial products if there are smaller borrowers.” Discussing the non-performing assets (NPA) scenario, Tiwari pointed out that core sector accounts (steel, power, ports and roads) accounted for about 65 per cent of the NPAs. However, slippages were moderating in the past three quarters.
“Steel was the hardest hit. But in the last six months, some positivity has been seen in the segment. With government push on infra and ‘Housing for All’ by 2022, there will be an uptick in steel consumption. Thus, we expect things to get back on track in a year’s time,” he said.
Tiwari also pointed out that UBI was driving efficiency and productivity through business analytics and digital channels. “Our overall goal will be to achieve quality growth, going forward,” he said. “Historically, we have been in the fifth position topline-wise (total business). Also, we have now moved to No. 2 in terms of profit (after SBI), up from fifth or sixth position some years ago. We are confident of maintaining the current positions in topline and bottomline,” he added.
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