Public sector major Union Bank of India has received Rs 14,500 crore in the form of Rs 2,000 bank notes since the Reserve Bank of India’s call for withdrawal of the currency notes in May. The bank’s MD & CEO A Manimekhalai tells Piyush Shukla and Ajay Ramanathan that the bank will continue to focus on CASA and not bulk deposits. Excerpts.
What is the total quantum of Rs 2,000 bank notes that have come back in the form of deposits since May?
We had about Rs 14,500 crore of Rs 2,000 bank notes coming in. Of that, about Rs 2,500 crore was in the form of exchanges, and Rs 12,000 crore in the form of low-cost deposits (current account and savings account or CASA) or fixed deposits.
Have you started accepting green deposits?
As of now we have not acted on that front. Usually, green deposits are used for the purpose of giving loans to the renewable sector. Out of our total loan book of Rs 8.2 trillion, Rs 10,500 crore is towards the green sector, including renewable, wind and solar… I want to double that portfolio. Going forward, we have a well-defined ESG policy. Social responsibilities are very clear to us and we are taking interest on that front. But on the environment side we need to step up.
Will deposit growth continue outpacing credit in Q2?
I have got good liquidity; if we look at my balance sheet, my LCR (liquidity coverage ratio) is close to 160%. My only concern is on CASA. That is where I will drive the whole bank to grow more CASA. If you look at my overall deposit book, 27% of it is bulk deposit and 73% is retail term deposit and CASA. That is the book I would like to grow to a better proportion rather than going in for bulk deposits. I don’t mind taking deposits, but then they should be low-cost, where I can bring a lot of customers. The credit growth right now is good; in Q1FY24 if we look on a sequential basis, credit grew just 1.63% but this quarter (Q2) I would do much better.
Which sectors are showing higher credit demand?
We want to grow RAM (retail, agriculture and MSME) to 56% (of overall book) and corporate to 44%. We have a 56:44 ratio (in favour of RAM) and we want to keep it intact. RAM will be a key growth sector. But the large corporate segment will also be a growth sector. Infrastructure is one area where we will be keenly looking at, especially roads and ports. Steel, chemicals, fertilisers, pharma, NBFCs and real estate are also other sectors we are looking at.
In retail we are looking at home loans, education loans, gold loans and we are doing well in digital pre-approved personal loans. Last year we started that journey and we have got close to Rs 2,000 crore where delinquency is very less as these are seasoned, salary-drawing customers and they have got a good record with the bank. However, we are not looking at growing personal loan book to a great extent; as of now personal loan portfolio is about 7% of total RAM book so that segment will grow only in digital mode.
What is the quantum of corporate loans in pipeline?
We have about Rs 26,000 crore of loans in pipeline, and about Rs 42,000 crore has been sanctioned already (in principle).
How many new branches would you open in FY24?
If you look at my branch network, almost 59% of my branches are in rural and semi-urban areas. Those are my growth centres right now. On top that, I have 17,000-strong business correspondent (BC) network. Our subsidiary UBISL (UBI services) gives me manpower. Last year when we started operations we had close to 130 people, but today we have scaled up and have about 3,600 people. By the end of this fiscal, we would like to scale it up further to 10,000 people. These people can help me with marketing, recoveries and reducing stress. Thus I don’t need to increase the branches. But if I get a good location where I can see a growth centre, we have built-in tools as well to judge whether there is growth potential in this location. Accordingly I will put branches. We are not averse to building our branches.
How do you compete with large private lenders like HDFC Bank, which is planning to open 1,500-2,000 branches this fiscal?
It is not that we (PSBs) are decreasing branches. If you look at why (there are fewer) branches, it was due to amalgamation. Within 2.5 km, there was another branch of the same bank… Even today, we are not closing branches; in fact we are using branches to scale up and make them specialised branches. It allows me to reduce cost-to-income ratio, plus the verticalisation (allows) better underwriting and of course I have a better viability over operations.
How much will the BC network increase this fiscal?
We are looking at certain locations. Previously, BCs were just opening accounts and dispensing cash. Now we have 20 to 25 other products that we want to do, like micro insurance, cash management, recovery of stressed assets. A single (business correspondent) can cater to so many products as they have got better understanding of the locality, so we will utilise them. This will also shore up their capacity utilisation and their income avenues will increase. We would be immediately increasing the (business correspondent) numbers by 5,000-6,000 at least in the next three-four months.