Mumbai-based Union Bank of India sees interest rate to soften going ahead and the bank may reduce lending rates further at a time when credit pick up is sluggish. In an interview with Vrishti Beniwal, the bank’s Chairman and Managing Director D Sarkar discusses issues related to asset quality and business growth. Edited excerpts:
How has been the year so far for your bank and what do you expect going forward in terms of business growth?
We are expecting our deposits to grow at 14-15 per cent and advances at 17-18 per cent this year. After seeing December-quarter figures, we may moderate the targets a bit if necessary, but so far we are maintaining the same growth.
What is your outlook on interest rates for your bank and the banking sector as a whole?
Interest rates may soften a bit and everybody is talking about it. RBI had said it may do something in the last quarter.
So, there is a possibility to bring down the rates.
Can we expect a rate cut from banks before the last quarter?
Some of the banks have already reduced the rates and we are also considering it. A reduction of 10-15 basis points is possible.
What is the situation of non-performing assets (NPAs) as far as your bank is concerned?
Our gross NPAs were 3.66 per cent at the end of September quarter. We are hopeful that we would be able to reduce it sequentially.
Banks are seeing an increase in debt restructuring this year. How much was the increase in your case?
We have restructured assets of Rs 2,400 crore in the last six months. Another Rs 2,200-2,300 crore may be restructured in the remaining part of this financial year.
Which sectors are mainly contributing to this growth in loan recast?
Some of the companies in power, steel and hotel are going for debt restructuring.
Where do you see your net interest margin settling down at the end of the year?
We are trying to maintain it at three per cent and I’m hopeful we would be able to maintain at that level, but not below three per cent.
What are your capital raising plans for this year?
We have asked the government for Rs 950 crore. The government was indicating that it would infuse the capital. It was under active consideration of the finance ministry.
Do you plan to go to the markets for raising capital?
We don’t have any such plans till March 2013. After that we can think about it.
Do you think consolidation is the way to go forward if Indian banks have to reach scale?
We have been hearing about consolidation for last four-five years but nothing has happened so far. If something happens we are ready for that.
The finance minister said the proposal would have to come from board of banks?
He said some consolidation has to come. I feel during a course of time it would happen if we need a big banking giant in our country.
Union Bank is one of the largest public sector lenders. Are you looking at some smaller banks?
At the moment we are not looking at any bank. This was only a beginning of the dialogue. Let the things get clear first.