Union Bank of India wishes to raise funds to sustain growth, through capital infusion by the government and from abroad through medium-term notes. Although the public lender has revised its credit growth targets downwards, it is actively looking at foreign branch expansion. M V Nair, chairman and managing director, shares the plans with Malvika Joshi. Edited excerpts:
Your Tier-I capital has fallen below eight per cent. What are your plans to improve it?
We are expecting '350-400 crore capital from the government this financial year, which will take its stake up from 57 to 58 per cent in our bank. That should take our Tier-I capital close to nine per cent.
What other means of fund raising?
We want to maintain our Tier-I around 9. We can raise substantial Tier-II capital through rupee bonds whenever we want, but depending on the interest rate scenario. We don't want to raise expensive funds.
Any plans for overseas funds?
Yes, through medium-term notes. We have plans to issue these to fund overseas operations. Within two months, we are planning to raise $300-500 million.
How is expansion abroad doing?
We are planning three new branches, one in Sydney (Australia) and one each in Belgium and Dubai. Also, a subsidiary in Britain. We are in talks with the regulators in the respective nations.
Non-performing assets have shot up in the recent quarters. Where do you see your NPAs at the end of the financial year?
We had given a guidance (official expectation) on our NPAs about 18 months before and had expected these to peak by September this year. They are expected to start coming down after September. By the end of 2011-12, our gross NPAs are likely to be below two per cent, as against 2.57 per cent in March.
What are you doing to improve your current and savings account (Casa) deposit growth? And, what is your take on wholesale deposits?
We are working with McKinsey and Co to develop customer satisfaction across all banking channels, to also help in customer acquisition and retention. Casa is our priority and we understand customer satisfaction and stickiness is needed to maintain a good Casa.
Our wholesale deposits in terms of size of '10 crore and above is about 32 per cent and we have a cap of 35 per cent. We would like to keep wholesale deposits at 32-35 per cent.
What are your credit and deposit targets for this year?
We have revised downwards our deposit growth to 15.5 per cent and credit growth to 18 per cent, in accordance with the policy rate rise of the Reserve Bank of India. We had earlier estimated a loan growth of 22 per cent and deposit growth of 19 per cent.
What is your take on the expected new banking licences?
There is enough space in a high-growth country like India. A large economy must have multiple players for healthy competition. Foreign banks bring a lot of high-end products. Public sector banks responded well to the competition. During the crisis of 2008, only public sector banks were efficient, which proves everyone is important. So, new players are welcome.
