Interview: PSU banks out of the woods; IndiaFirst Life Insurance IPO likely by March, says Union Bank MD

What are the key retail loan products you will push for growth in the current year?

RAM (retail, agriculture and MSME loans), asset quality, CASA (current account and savings account), and earnings—these are my four major focus areas for the bank. We want to keep the RAM and corporate loan ratio at 56:44, in favour of retail loans...

Within RAM loans, housing loans remain our focus area and we also want to extend many education loans. That is another area we are really looking at, we would like to increase those numbers. Presently, total education loans are around Rs 7,000 crore, so we would like to at least double these numbers by March-end.

Have you partnered with educational institutes?

We are doing a lot of activities for education loans and have talked to all the IIMs (Indian Institutes of Management) and IITs (Indian Institutes of Technology). We have launched two new products for the premier institutes in India and foreign countries, about a month back. We have seen good traction in our IIM education loans. Now IIT admissions will also start, I think, in the next 15-20 days. It will start so we will try to push those numbers also.

Will RAM advances maintain double-digit growth?

Yes, they will surely do this. We also have a digital product of personal loans for our customers. Our own customers, who have a specific number of CASA balances, we give them a pre-approved loan. We launched this product at the end of May, and we have done close to Rs 300 crore… We also have a subsidiary named UBISL, that is, Union Bank of India Subsidiaries Ltd. We are going to engage people with UBISL who will also act as a DSA (direct selling agents) for the bank and they will also do home loans and others.

Vehicle loans we have done very well during the previous quarter, we did about 36 percent growth (year-on-year) and that trajectory will always remain. In home loans, we have seen almost 12 percent growth. So all the areas of retail we will do well. We are looking at the same kind of growth in agricultural loans also. We did around 14 percent (year-on-year growth in Q1), we may not be at 14 percent but we are looking at double-digit growth. We are looking at KCC (Kisan Credit Card scheme), because now is the season for it and we are looking at increasing gold loan advances.

There are schemes of the government of India for dairy finance, AIF (agricultural infra financing facility). There are various other products (schemes) of the government that have been launched… We actually have not given it proper thought yet so those numbers will also increase.

Will you be doing co-lending of loans with non-banking financial companies?

We are aiming Rs 2,000 crore in co-lending this fiscal. Focus areas for co-lending will be RAM products and MSME (micro, small and medium enterprises) loans...

Are there any big-ticket loans in the pipeline for Q2FY23?

We have done a lot of HAM (hybrid annuity model) projects (for highways), that is what we are aiming at this fiscal. We are also looking at chemical industries, hospital projects, agriculture-processing units.

We have done a Rs 2,000 crore loan for the Ganga Expressway… All our projects are mostly less than Rs 1,000 crore. This is a new project.

In road projects, it (loan ticket size) is less than Rs 1,000 crore. It is at about Rs 800-900 crore each. We are not looking to tie up with other banks for it.

How much will Union Bank’s loan rates rise if the Reserve Bank of India hikes the repo rate?

The RBI has already raised it by 90 bps (basis points). We feel that the RBI may line up another 25 bps in the next MPC (monetary policy committee meeting scheduled on Friday)…and this will, of course, be passed on to the customer.

And how much will deposit rates rise?

We have already raised the deposit rate. The bank’s next ALCO (asset-liability committee) is on August 11, and by that time rates (RBI repo rate) will come. We will have to (increase deposit rates). My deposits growth will be something around 9.5 percent to 10 percent (year-on-year).

Will you launch a repo-linked deposit product?

As of now, we are not looking at those kinds of rates (offered in repo-lined deposits). We will see how the market behaves… We are now comfortable with our total deposits, if we need more deposits then probably we will come out with these new products.

What is the CD ratio that the bank will maintain this fiscal?

We are looking at 69 percent to 70 percent CD ratio (credit-deposit ratio).

Will NIM improve from 3 percent as of June end?

We are expecting NIM (net interest margin) to be around 3.1 percent by March.

Your guidance on asset quality?

We are targeting up to Rs 13,000 crore in slippages and below 9 percent GNPA (gross NPA) in FY23. Net NPA, about 3 percent is my target. Credit cost will be around that percent (2.02 percent in Q1). Further, we are targeting Rs 14,000-15,000 crore of recoveries this fiscal.

How is the restructured pool of assets performing?

We did have a bit of stress in large corporate…and some stress in MSME and retail advances. Retail advances, though they show signs of stress, we are able to get them back to the standard assets (category). But MSME advances are little on the stressed side, so that we will have to work out.

Will treasury income improve going ahead?

We have other sources of income, and we feel that the markets will correct themselves and we may see an upward trend in treasury income at least in September (quarter).

Can you provide business growth guidance for your subsidiaries?

All of them (subsidiaries) have promised me a number of 2x (business growth). Mutual fund, insurance businesses and others have promised a number of 2x. The last two years were impacted due to Covid-19, and everybody feels they can do much better in the current year…As of now we do not have any monetisation plan. The monetisation was last done in March 2022, and after that we do not have a plan.

I think one of our subsidiaries may come out with an IPO (initial public offering) by March 2023, that is IndiaFirst Life Insurance. Now, our stake is reduced to 9 percent in IndiaFirst Life Insurance.

Have you appointed merchant bankers for the bank’s planned QIP?

We have not started yet… We have received board approval to raise up to Rs 8,100 crore (in FY23) and we have already Rs 1,300 crore, and we will come out with the QIP (qualified institutional placement of shares) in a phased manner.

Will the bank be looking at reducing the government’s stake to 75 percent this fiscal?

We are looking at that. That is my aspiration, so that I can have a better float and a better market capitalisation.

Do you think that asset quality pains are behind PSU banks?

We are working hard. PSU banks have also become very aggressive and competitive. Look at them (bank team sitting in office), we have the best of the talents. Digitisation is on the move, we will build on it. We have brought out so many products.

If you see, PSU banks were always industry leaders, we had lost out somewhere. So now we are picking up, all of them. We were bogged down by NPAs, NPAs are getting cleaned up and our people are working, and we are showing the results…

Can you comment on lack of representation of female leaders in banking sector top roles?

Now we have got two appointments in the insurance space, two women have already been appointed. So we will see more women leaders, possibly in the next one or two years.

I have always been saying that leadership and competency has got no gender. Hard work and commitment have no gender. One has to work hard to get to wherever you want to get.

It is not about, you know, being a women leader or male leader. It is about your competency, whether you can rise to that level. That is what I want to say.