United Bank of India (UBI) plans to leverage on its business relationships with state governments to expand its low-cost deposit base. The public sector bank has already opened 120,000 salary accounts of government employees in West Bengal in the past six months.
"We are talking with the state governments of West Bengal, Tripura, Manipur and Assam and exploring opportunities in the salary account segment. It will help us to maintain our current account savings account (CASA) over 40 per cent," Bhaskar Sen, chairman and managing director of United Bank of India told Business Standard.
The state-run lender has maintained its CASA deposit mix over 40 per cent for the last eight quarters even as most banks have witnessed a decline of 3-6 per cent in CASA deposits during this period. The bank closed April-June quarter with a CASA ratio of 40.3 per cent.
Sen said keeping CASA ratio consistently over 40 per cent is "challenging" and hence the bank has been exploring different opportunities to mobilise low-cost deposits.
"I don't see much of competition from other banks in this (government salary account) segment," Sen said.
In the current financial year, the bank will add another 84 branches to its existing network of 1,690 branches to drive growth in CASA deposits.
At the same time, United Bank of India is also shedding its high-cost bulk deposits, which currently accounts for 15.6 per cent of its total deposits. Earlier, the finance ministry had asked government owned banks to cap the proportion of their bulk deposits (including certificates of deposit) to 15 per cent by March, 2014.
The total deposits of the bank were at Rs 89,639 crore at the end of June, 2012.
"We met the management of United Bank of India and came back positive...We expect the bank to benefit from salary accounts of government employees, headroom available on loan deposit ratio and the bulk deposit proportion, which the bank guided to further reduce to 13 per cent by financial year 2012-13," Emkay Global Financial Services' analysts Kashyap Jhaveri, Pradeep Agrawal and Aalok Shah said in note to their clients released today.
