UBI expects credit growth
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.”
NEW LOAN PRODUCTS
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.
CHANGES ON IT FRONT
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
TIER 2 & 3 CITIES
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