Union Bank sees margin pressure on rising cost of deposits

State-run Union Bank of India is likely to see pressure on its margins in the near-term due to rise in cost of deposits, a top official of the public sector lender said today.

"Margins are under pressure as cost of deposits have gone up marginally due to revision of FCNR rates. However, we have reduced the bulk deposit rates," Union Bank of India (UBI) Chairman and Managing Director D Sarkar told reporters on the sidelines of an event here. The bank will hold its base rate as of now, on the back of liquidity tightening measures from the Reserve Bank and wait for the next policy review for its future decision, he added.
Last week, the bank rolled back its earlier reduction in base rate by revising it by 25 basis points to 10.25 percent. On the restructuring side, Sarkar said the bank may see some addition in restructuring as some power discom (distribution companies) accounts may be recast in the future.
He, however, said the bank would try to contain the bad assets at the present level. On the impact of rupee fall on remittances flow to the bank, Sarkar said UBI expects increased inflow in this segment. The bank posted a 9.5 percent rise in net profit at Rs 560.22 crore in the first quarter of the current fiscal. It also improved asset quality with gross NPA coming at 3.5 percent in the June quarter as against 3.76 percent a year earlier and net NPA of 1.96 percent from 2.2 percent reported a year ago.