State-run Union Bank of India's lending exposure to non-banking finance companies had remained unchanged even after the Reserve Bank of India tightened the norms, Chief Executive Officer and Managing Director A Manimekhalai said on January 20.
“Our exposure to NBFCs is almost 14 percent of our book and it has not come down after RBI regulations,” Manimekhalai said during the press conference after announcing the December quarter results.
In the quarter, the bank's gross advances stood at Rs 8.96 lakh crore, up 11.44 percent on-year.
Of the gross advances, domestic advances were at Rs 8.67 lakh crore, up 10.69 percent on-year. This was followed by overseas advances at Rs 29,285 crore, up 39.41 percent.
On November 16, the Reserve Bank of India increased risk weight by 25 percent on consumer credit exposure of commercial banks and non-banking finance companies (NBFCs) to 125 percent.
“On a review, it has been decided to increase the risk weights on such exposures of Schedule Commercial Banks (SCBs) by 25 percentage points (over and above the risk weight associated with the given external rating) in all cases where the extant risk weight as per external rating of NBFCs is below 100 percent,” the RBI had said.
Consumer credit of commercial banks and NBFCs risk weight was revised to 125 percent from of 100 percent.
The move came after RBI Governor Shaktikanta Das in the October monetary policy flagged the high growth in certain consumer loans and advised banks and NBFCs to strengthen their internal surveillance mechanisms to address the build-up of risks, if any, and institute suitable safeguards.
In October-December quarter, Union Bank of India reported a 60 percent rise in standalone net profit at Rs 3,589.91 crore. The net profit is in line with Motilal Oswal’s estimate of Rs 3,558.2 crore.
On sequential basis, net profit was up just 2.24 percent.
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