In an interview to CNBC-TV18, Charan Singh, Executive Director, UCO Bank, shares his views on the impact the Reserve Bank's change in lending rate math will have on the bank's financials.
Below is the transcript of Charan Singh’s interview with Ekta Batra on CNBC-TV18.
Q: Can you just highlight what the impact of the marginal cost of funds would be on your net interest margins (NIM) and how much of your loan book is floating versus fixed?
A: In fact, we have most of the loan book on a floating basis now. Fixed is very meagre amount that way. And as far as NIM is concerned, certainly, the impact will be there of this new non-performing loan ratio (NPLR) system of deciding the base rate, but we have not worked out till now because recently, it has come out and we will discuss the policy and work out what will be the impact on our NIM and all that. Because, basically, what we find is that there are three areas where there is a shift in this new policy. First of all, the component part, marginal Cost of Funds-based Lending Rate (MCLR), earlier the costing was on the basis of the average cost of deposits.
Now, it is marginal cost of funds. So, certainly, the marginal cost of funds that also includes marginal cost of borrowings and the return on network. And in borrowing again, there are two components, deposits and borrowing from the market. So, 92 percent is on the basis of the deposits and 8 percent on the borrowings. So, those banks who are major dependant on the borrowings from the market, they will feel more heat with this because otherwise, those who are dependent on the deposits because the cost will not increase, it will remain almost constant.
Q: Since we have you with us, there were some reports indicating that an anonymous whistle-blower has written an open letter to the enforcement directorate exposing how some of the senior officials of the bank. There was some misuse of fund which had taken place with regards to exports to Iran. Any comments on that and any updates you could provide?
A: I would not like to offer any comments on that.
Q: How is credit growth looking? Last quarter was flat. If you could just leave us with what the credit growth is now?
A: Credit growth is still flat almost. Not very encouraging signs, but we are still trying to push it and let us see in the second and the last quarter if any improvement can come, but it is at the moment, it is still flat.
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