The banking system saw a substantial drop in credit growth in 2007-08. For us, retail credit growth rate moved up from 14 per cent in September to 22 per cent now. We expect 25 per cent growth this year. For SME lending, we expect 35-38 per cent growth due to the steps we have initiated.
Credit demand hinges on the performance of agriculture and the monsoon. Our own expectation was that interest rates will decrease but the situation has changed. Inflation is definitely a worry.
How is the demand from companies?
So far, it is holding on to earlier levels. They have huge plans to invest but due to the uncertainty, there is possibility of delay in drawls (using sanctioned credit lines).
In the past, you spoke of expanding overseas. What is the progress?
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We already have a presence in Shanghai and Abu Dhabi. We have started operations in Hong Kong, which will support Indian companies that have overseas expansion plans. We are also looking for presence in the United Kingdom, Canada, Australia or New Zealand and some countries in southern Africa.
Besides the presence of the Indian diaspora, our decision of entering a country will be based on how restrictive the regulatory set up is. We have a $2 billion medium term note (MTN) plan, though we need to figure out when to raise the money. But we need RBI approval.
What about entering other segments and your domestic expansion plans?
We are finalising our asset management company and will sign an MoU with KBC (Asset Management), which accounts for 13 per cent of the mutual fund business in Europe. Union Bank will hold a 51 per cent stake in the venture and KBC will have the remaining shares. Last year, we opened 155 branches.
The year before that, we opened 124. We had opened 100 branches in the 10 years before that. We can open 100 more branches and will seek permission to open 400 more. There is so much business in new centres, rural areas and on the outskirts of cities that are expanding.
Whenever there is talk of consolidation, Union Bank is always mentioned...
Last July, we decided to position the bank in a distinctive way and transform it into a consumer-centric entity. We are looking to completely change the architecture with focus on technology, processes and people. The driving force for consolidation is size. In a public sector enterprise, it needs political will. In a country like India, there is enough opportunity to grow. Till the time of any consolidation, we thought the best thing to do is gain in size organically.
What about your plans for a rights issue?
There is sufficient elbow room for tier II bonds and we have not used the perpetual bond route so far. We know how the markets are doing. It is not the perfect time for a rights issue.