Union Bank home, auto loans segment pick up in current fiscal

Union Bank of India a state owned lender is expecting its home, auto loan portfolios to grow in the current fiscal but it added that it might not be possible for it to achieve the credit growth of 25 per cent which it had targeted for FY10.

Union Bank of India Chairman and Managing Director, M V Nair informed reporters although bank had targeted a growth of 25 per cent in the present fiscal but due to difficult market conditions it might be able to attain 20-22 per cent.

He added, "We had targeted a loan growth of 25 per cent in this fiscal. But in the present conditions, this is difficult to attain. Our credit is currently growing at 18.3 per cent. For the full fiscal, we may achieve 20-22 per cent".

Nair said in the current period bank has seen growth in its home, auto loans segments therefore is hopeful of increase in the credit off take of these segments in the coming months.

He added, "Our expectation is that the home loans will pick up in the next few months. There is a good demand for home loans. Auto loans have also started picking up."

Nair said in the current fiscal bank is also expecting its deposit portfolio to grow by 20-22 per cent and added till December the interest rates in the industry will remain stable and rise is possible only, if the credit growth picks up.

Nair informed although there were uncertainties in the market that liquidity in the system might get adversely affected due to government borrowing but the current indications show that the liquidity will not have any major impact.

In a reply about the impact of the weak monsoon on the growth of economy and rise in bad loans in the banking system Nair said, "It is too early to comment on the impact of monsoon."

The public-sector lender is classified under tier-II with headroom of Rs 2,500 crore expects to rises around Rs 500-crore by September.

Nair stated over the past few years bank is in the process of implementing strategies to grow its fee-based income and has seen a 40-45 per cent core fee-based income year-on-year.

Over the past five years the bank has invested around Rs 332 crore on the technology side including the implementation of core banking solution.

He said by end-fiscal bank plans to migrate 35 per cent of its total business to total business to core banking solution.

Currently bank’s 27 per cent business is being carried out through CBS.

Expressing views on the decision of RBI of putting cap of Rs 10,000 on third party ATM transactions and limit the free transactions to five a month, Nair said banks have to yet decide on the matter.

Nair informed, "We are yet to take a call on the matter, RBI has left that issue to the decision of banks".

Regarding expansion plan Nair said, Union Bank has taken decision to launch lobby banking in around 100 branches across the country at the same time it will offer relationship banking through another 300 branches for relationship banking.

Nair further added bank has brought two of its Regional Rural Banks (RRBs)— Kashi Gomti Samyut Gramin Bank and Rewa Sidhi Gramin Bank — under CBS.

Union Bank, in alliance with Banglore-based International Institute of Information Technology released a report on technology-led transformation of Indian banks.