The immediate task for D Sarkar, chairman and managing director of Union Bank of India, who took charge earlier this month, would be to address worsening asset quality, which also affected the Mumbai-based lender’s credit rating. In an interview with Manojit Saha, he charts the priorities and strategies to increase retail presence and business expansion plans. Excerpts:
Just a few days before you joined, Moody’s downgraded the bank’s rating by a notch, owing to asset quality pressure and lower capital adequacy ratio. How will you address the issue?
Certainly, asset quality is a concern for the bank. The slippages mainly took place in the small ticket loans in sectors like, small and medium enterprises, agriculture and retail and the thrust would be on recovering those. It should be the prime job at the operational level to examine the position of non-performing assets (NPA) on a real time basis. Effective close monitoring of accounts, which has a tendency to slip into NPA, would be required. This might lead to higher administrative cost, as more officials need to be deployed, but we would budget for that.
In addition, the big chunk NPAs, that is Rs 5 crore and above, would be monitored directly from the head office.
Where do you see the NPA figures by end 2012-13? Till now, slippages from restructured assets were about 14 per cent. Do you see the figure rising?
We like to see our gross NPA ratio falling below three per cent by March, which was 3.33 per cent by December-end. There may be some more additional slippages, but overall, we think we can contain these from restructured assets within this level.
How do you want to address the issue of capital adequacy?
We have recently received Rs 650-crore capital infusion by Life Insurance Corp. With this, the capital position is comfortable at this moment.
What will be your priority in terms of business expansion?
My priority would be to increase the retail focus, both in deposit and advances. We have about 3,200 branches and nearly 4,000 automated teller machines. We want to use this distribution channels to boost retail business.
The share of retail loans to the total book is only 10 per cent. So, there is a lot of scope to grow. In retail we will focus on mortgage lending and auto loans.
On the liabilities side, about 58 per cent of our branches are in the rural and semi urban areas. We would focus on these branches to beef up low cost deposit or the current and saving account (Casa) deposit mobilisation.
What kind of Casa deposit growth you expect?
While savings deposit forms 23 per cent of total deposits, the current account deposit share is 8.5 per cent. We would target 20-22 per cent growth of low cost deposits in the current financial year.
What was the business growth in the previous financial year and what are the projections?
The total business of the bank crossed Rs 4 lakh crore in March with 18 per cent growth in credit, higher than the industry average. Deposit growth, however, was lower at 10 per cent. We expect deposit mobilisation to gather pace with inflation coming down. We target 16 per cent deposit growth in the current financial year.
So far as credit growth is concerned, we would like wait for the annual policy review of Reserve Bank of India to set our projections. The endeavour will be to better the industry average. We will meet a day after the policy to decide on the numbers and also on interest rates.
What we want to ensure a steady growth throughout the year. The spike in credit and deposit growth that banks generally experience during quarter end or year-end comes at a high cost because cost of deposit shoots through the roof during those period.
What is your expectation from the RBI’s annual monetary policy review?
I hope there would be some relief for banks in the upcoming policy. I expect a repo rate cut of 25 bps along with a CRR cut of 25-50 bps.