UBI ex­pects credit growth

Banking Frontiers - - Highlights - Me­hul@bank­ingfron­tiers.com

Prod­uct in­no­va­tion and tech­nol­ogy upgra­da­tion are fa­cil­i­tat­ing growth for Union Bank of In­dia

RBI data in­di­cate that credit growth has dras­ti­cally re­duced to 5.08% in the fi­nan­cial year 2016-17, as against 10.69% a year ago. The out­stand­ing credit of banks as of 31 March 2017 stood at `78.81 tril­lion com­pared to `75.01 tril­lion as of 1 April 2016. The credit growth in 2016-17 is the low­est since 1953-54 when it was up by merely 1.7%.

Dur­ing FY 2016-17, growth in ad­vances of the Union Bank of In­dia (UBI) was 8.62% against the in­dus­try av­er­age of 5%. Due to en­cour­ag­ing growth of 15.2% in re­tail, agri­cul­ture and MSME sec­tors, do­mes­tic ad­vances of the bank in­creased by 8.2% from `2.516 tril­lion as on 31 March 2016 to `2.722 tril­lion as on 31 March 2017. A.K. Goel, ED of the bank, says: “Re­tail, agri­cul­ture and MSME sec­tors to­gether con­trib­uted sub­stan­tially in the in­cre­men­tal credit of the bank. Th­ese 3 sec­tors now have a share of 53.8% in do­mes­tic ad­vances of the bank, up from 50.5% a year ago.”


The growth in credit has also come about as a re­sult of prod­uct di­ver­si­fi­ca­tion. Dur­ing FY 2016-17, the bank en­tered into tieups with au­to­mo­bile man­u­fac­tur­ers for in­creas­ing credit through fi­nanc­ing light com­mer­cial ve­hi­cles up to `10 lakh. Un­der this, com­mer­cial ve­hi­cle loans up to `10 lakh are col­lat­eral free and re­quire very min­i­mal doc­u­men­ta­tion. The bank also cre­ated a spe­cial scheme for fi­nanc­ing road trans­port op­er­a­tors for pur­chase of light com­mer­cial ve­hi­cles (LCVs) un­der tie-ups with var­i­ous man­u­fac­tur­ers. Says Goel: “We fi­nanced pur­chase of 28,224 LCVs ag­gre­gat­ing `706 crore in 2016-17. Some of the prom­i­nent names, with whom the bank has tie-ups are Ashok Ley­land, Tata Mo­tors, Mahin­dra & Mahin­dra, VECV and Pi­a­gio.”

In line with the emerg­ing startup in­dus­try, the bank in­tro­duced Union Start-Up Scheme dur­ing FY 2016-17 in which it pro­vides a plat­form for busi­ness units iden­ti­fied un­der ‘Start-Up In­dia’ scheme of the gov­ern­ment. Un­der this scheme, work­ing cap­i­tal and term loans fi­nance up to `5 crore is pro­vided at con­ces­sional rate of in­ter­est and zero pro­cess­ing charge. Goel says as on 31 March 2017, the bank has sanc­tioned loans of up to `109 crore to 560 startup en­ter­prises.”

Union Turnover Plus was in­tro­duced dur­ing the year for fi­nanc­ing of such mi­cro and small en­ter­prises that adopt dig­i­tal cash­less chan­nels for their busi­ness trans­ac­tions. The bank of­fers up to 30% of dig­i­tal por­tion and 25% of bal­ance por­tion on pro­jected sales of MSEs hav­ing dig­i­tized sales turnover of above 50%. The bank has also in­tro­duced Union Trade Plus scheme in May 2017 to pro­vide credit to small and re­tail traders up to `5 crore at 100% col­lat­eral cov­er­age. “This scheme of­fers bet­ter rate of in­ter­est and re­lax­ation in cal­cu­la­tion of draw­ing power along with a host of at­trac­tive fea­tures. For pro­vid­ing ini­tial sup­port to small traders, POS ren­tal charges for one ma­chine for first 12 months would be waived off,” says Goel.


The bank strength­ened Union Loan Points for cen­tral­ized pro­cess­ing, sanc­tion­ing and mon­i­tor­ing of re­tail loans. It has also en­hanced the func­tion­al­ity of Cen­tral Pro­cess­ing Cen­ters (SARAL) for bet­ter credit ap­praisals of MSME loans. It has a Credit Risk Man­age­ment Com­mit­tee (CRMC) that over­sees the credit risk func­tion in the bank. It adopts a com­mit­tee ap­proach for credit sanc­tions and has credit ap­proval com­mit­tees at var­i­ous lev­els. Goel ex­plains: “For cor­po­rate ex­po­sures, there are sep­a­rate mod­els for credit risk as­sess­ment for dif­fer­ent ex­po­sure seg­ments. A cen­tral­ized rat­ing pool is also set up at cen­tral of­fice to im­prove the rat­ing qual­ity, cre­ate a ro­bust rat­ing data­base and for bet­ter ad­min­is­tra­tion of rat­ing mod­els.”

For the re­tail port­fo­lio, the bank uses a score­card based ap­proach. It has es­tab­lished spe­cial­ized units like ULP and SARAL to process the re­tail and MSME loans re­spec­tively. The teams in th­ese spe­cial­ized units are well trained and en­sure the high­est stan­dard of as­sess­ment of credit pro­pos­als. They seg­re­gate them­selves from the credit orig­i­nat­ing team and thus en­sure that no con­flict of in­ter­est arises, while sanc­tion­ing the pro­posal.” The bank has com­pre­hen­sive in­ter­nal rat­ing mod­els and scor­ing mod­els for re­tail prod­ucts.


The con­tin­ues to be in the fore­front of tech­no­log­i­cal in­no­va­tion in bank­ing with its cut­ting-edge tech­nol­ogy. In tan­dem with the gov­ern­ment’s ini­tia­tive on dig­i­tal trans­ac­tions and a less cash econ­omy, mo­bile ap­pli­ca­tions, in­ter­net bank­ing,

e-com­merce, sup­port for debit/credit card based trans­ac­tions and Aad­haar en­abled pay­ment ap­pli­ca­tions were up­graded for bet­ter cus­tomer ex­pe­ri­ence, re­li­a­bil­ity and rich func­tion­al­ity. Dur­ing FY 201617, the bank ini­ti­ated EKYC so­lu­tion by en­abling pa­per­less KYC ver­i­fi­ca­tion. It also launched Jee­van Pra­man for se­nior cit­i­zens to dis­pense the need of phys­i­cal doc­u­ment ver­i­fi­ca­tion along with en­hanced se­cu­rity and au­then­tic­ity.

Mov­ing a step ahead with its tech­nol­ogy drive, the bank’s ATM switches have been up­graded to the lat­est ver­sion that sup­ports re­quired APIs for dig­i­tal pay­ment ecosys­tem. To pro­mote dig­i­tal revo­lu­tion, the bank launched Uni­fied Pay­ment In­ter­face (UPI) for fund trans­fer to loan ac­count, en­able­ment of bill pay­ment fea­ture in mo­bile bank­ing and Aad­haar en­abled mer­chant pay­ments. Goel ex­plains: “View­ing the se­cu­rity is­sues of its cus­tomers, we have launched green PIN so­lu­tion to re­gen­er­ate ATM PIN, in which cus­tomers can eas­ily re­set their ATM PIN with few sim­ple steps. For sup­port­ing ac­ces­si­ble bank­ing so­lu­tions, the bank in­tro­duced mo­bile pass­book (m-Pass­book) which has nearly re­placed the tra­di­tional pass­books.”

The bank is gain­ing mo­men­tum in its so­cial me­dia pres­ence. In FY 2016-17, the bank launched Twit­ter, Face­book and In­sta­gram pages and also a YouTube chan­nel in or­der to con­nect with its cus­tomers and other stake­hold­ers. Goel adds: “The bank has de­rived many op­por­tu­ni­ties to ad­ver­tise its new prod­ucts on its so­cial me­dia plat­forms. By ap­pro­pri­ately chan­nel­iz­ing its so­cial me­dia pres­ence, the bank also re­ceived ap­pre­cia­ble feed­back on its Twit­ter han­dle. This type of tech­no­log­i­cal out­reach makes the bank more cus­tomer-cen­tric.”


The bank is re­lent­lessly en­cour­ag­ing its em­ploy­ees in up­grad­ing knowl­edge base and skillsets through e-learn­ing por­tals. It also in­cen­tivizes the staff to ac­quire ex­per­tise in bank­ing re­lated field. “In­tro­duc­tion of HR Su­vidha, a cen­tre for fa­cil­i­tat­ing cen­tral­ized sanc­tion­ing of em­ployee ben­e­fits, has greatly en­hanced em­ployee sat­is­fac­tion. Bank has re­cently set up HR an­a­lyt­ics unit with the ba­sic ob­jec­tive of lever­ag­ing HR in­for­ma­tion for strate­gic de­ploy­ment of hu­man cap­i­tal, an­a­lyz­ing HR im­pact on or­ga­ni­za­tional prof­itabil­ity, re­ten­tion and iden­ti­fi­ca­tion of tal­ent for suc­ces­sion pipe­line,” says Goel


The bank be­lieves that there is greater op­por­tu­nity in tier 2 and 3 cities for af­ford­able hous­ing un­der ‘Hous­ing for All by 2022’ vi­sion of the gov­ern­ment. Says Goel: “The bank en­deav­ors to raise ticket size in hous­ing loan seg­ment in the year ahead. We aim to raise mar­ket share in high growth tier 2 cities and semi-ur­ban ar­eas.”

Fur­ther, as more busi­ness will be com­ing un­der the am­bit of GST, the bank will have tremen­dous op­por­tu­nity, in the form of those busi­nesses, which were oth­er­wise out­side the purview of for­mal bank­ing chan­nels.


With the emer­gence of dig­i­tal In­dian drive, the bank ex­pects to in­crease its dig­i­tal ser­vice base for en­hanc­ing cus­tomer ser­vice ef­fi­ciency. Says Goel: “Mov­ing at par with pre­vail­ing macroe­co­nomic and bank­ing sce­nario, we ex­pect our credit and de­posit growth in the range of 8-10% and 6-8% re­spec­tively for 2017-18. We are also pro­ject­ing an in­crease in our CASA share to 35% in FY 2017-18 from 34% in FY 201617, mean­ing an in­crease of ap­prox­i­mately 100 bps.”

A.K. Goel aims to raise the ticket size for hous­ing loans

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