Public sector lender Union Bank of India expects to see a “manageable” impact from the Reserve Bank of India’s (RBI) project finance draft guidelines on overall business, MD & CEO A Manimekhalai told reporters here today.
Project finance loans currently constitute 28% of the bank’s overall Rs 2.96 trillion of corporate loan book, she said, adding that about 68% of the overall project finance loans are already completed and have started showing operational profitability.
“The phased approach of implementation (of the RBI draft norms) means that immediate impact of these changes will be manageable by the bank…,” the MD said, adding that the bank has provided its feedback to the regulator on the guidelines already.
The RBI, in its May 3 draft guidelines, said lenders should maintain a provision of 5% for loans extended to under-construction projects, and that these provisions can be made gradually in phases till FY27.
Once the project enters the operational phase, the provisions can be reduced to 2.5% of the funded loans.
It can be further reduced to 1% of the funded outstanding provided that the project has achieved certain operational viability metrics.
Q4FY24 results
Union Bank on Friday released its Q4FY24 earnings, posting a net profit of Rs 3,311 crore, up 19% on a year-on-year (YoY) basis.
The bank’s net interest income (NII) grew 14% YoY to Rs 9,437 crore, whereas non interest income was lower 11% YoY to Rs 4,707 crore.
The bank’s board has recommended a dividend of Rs 3.60 for FY24.
Net interest margin (NIM) improved by 11 basis points (bps) on-year to 3.09% during Q4, and will likely stay between 2.8-3% range in FY25, the MD said.
The bank’s overall deposits, meanwhile, rose 9.3% YoY to Rs 12.21 trillion as on March-end, of which low-cost current account and savings account (CASA) accounted for 34.20%, lower than 35.62% a year ago.
The bank is aiming to grow deposits between 9-11% in FY25 and is comfortable with credit-deposit (CD) ratio rising by 2-3% more from 75.6% as on March, 2024.
The bank will open between 250-300 branches in FY25.
Overall advances rose 12% YoY to Rs 9.04 trillion in Q4FY24 and will likely rise between 11%-13% in FY25.
The lender has around Rs 40,000 crore of corporate loans in pipeline from multiple sectors including steel, PLI segment, renewables, among others.
Lastly, asset quality improved with gross and net non-performing asset ratio (GNPA, NNPA) improved to 4.76% and 1.03% in the March quarter from 7.53% and 1.70% a year ago, respectively.
The lender is aiming GNPA of less than 4% in FY25, and targeting Rs 16,000 crore of recoveries in the current fiscal.