Want to cut govt stake in Union Bank to at least 75%: CEO A Manimekhalai

A Manimekhalai, managing director and chief executive officer, Union Bank of India, took charge at the public-sector lender in early June. In her first interaction after taking office, Manimekhalai shares with Manojit Saha and Abhijit Lele the bank’s plans to reduce bad loans and increase deposits in current and savings accounts. Edited excerpts:

Union Bank has the board’s approval to raise Rs 8,000 crore. You said the bank was looking to raise funds via qualified institutional placement (QIP). How much do you want to raise in the next few quarters?
 

We want to do a QIP because our market capitalisation is low. Only 10 per cent is available as float. The government holding is about 83 per cent and the Life Insurance Corporation has 7 per cent. We have to improve those numbers [float]. We are waiting for the market conditions to improve. I want to do a QIP because we want to reduce the government stake to a maximum of 75 per cent. If the market conditions improve, we will come out with a QIP, through which we want to raise about Rs 3,500 crore.

Union Bank’s gross non-performing assets (GNPAs) are 10.22 per cent of gross advances as of June-end. How do you plan to bring the percentage down?
 

This is a focus area for the bank -- how to reduce GNPAs and how to reduce slippages. For that we have created verticals. Loans above Rs 20 lakh that have become NPAs are tackled by asset recovery branches (ARBs). We have also stressed asset management (SAM) branches where they focus on NPAs of more than Rs 25 crore, including the accounts that are referred to the National Company Law Tribunal.
 

We have brought out an aggressive one-time settlement (OTS) scheme for the bank, which is applicable to loan books below Rs 5 crore. We launched this scheme just 15-20 days ago and so far 30,000 accounts have been settled, amounting to close to Rs 700 crore. We have also created a digital platform.
  

We have to reduce slippages. Ninety per cent of our loan books are rated BBB and above. So we will not have much of a problem.
 

We are looking to bring down the GNPA percentage to less than 9 per cent this financial year, and the net NPA ratio to below 3 per cent from 3.31 per cent.

What kind of recovery do you expect in the current financial year?
 

We have identified another 10 accounts for OTS, which will fetch us Rs 3,000-3,500 crore. These are accounts of over Rs 100 crore.
 

For the full year, we have a recovery target of Rs 14,000-15,000 crore. And slippages will be around Rs 13,000 crore. In Q1 also, we did more recovery than slippages.

The other priority of the bank is to improve the Casa (current and savings accounts deposits) ratio. The bank’s Casa ratio was 36.19 per cent at the end of June, down from 36.39 per cent a year ago. How do you plan to improve that?
 

Casa is a numbers game the branches have to play. What I have noticed is that relationships at the branch level are not so good and customer satisfaction levels have not improved. So we have improved the ambiance of the branches, and deployed more people in them. We have given targets to them. Of our 450,000 customers, 17 per cent do not have any account with us, and 73 per cent maintain a balance of just Rs 10,000. We are asking them to keep an amount equal to three-four equated monthly instalments of their home loans. Also, for large corporate clients to which we extend loans, we are looking to get their payroll accounts. For every such loan we are trying to get an ancillary business like a savings account or a current account. We plan to increase the ratio to 37.8 per cent by the end of FY23.

Do you see a pickup in wholesale loans? If so, which sectors have good demand?
 

We are seeing traction in renewable energy, roads, and non-banking financial companies. Pharma and commercial real estate are the other sectors in which we are seeing good growth.

The net interest margin of the bank was 3 per cent in Q1. What is your guidance on the margins?
 

We will try to keep the margin at 3-3.1 per cent. Other income, even if you exclude treasury, will grow.