Q&A: Arun Kaul, CMD, UCO Bank

'Interest rates to be raised, if we get uncomfortable'

After the Reserve Bank of India (RBI) upped the repo rate by 25 basis points, which also means a 25 bps rise in reverse repo rate, most banks are yet to decide whether to pass on the increased interest rates to the consumers. UCO Bank Chief Managing Director Arun Kaul tells Malvika Joshi and Shaikh Zoaib they will do so only if the RBI's action results in making his bank uncomfortable. Edited excerpts:

The RBI revised the policy rates on June 16, will you increase the interest rates? If yes, when?
We have not decided anything yet, but in case the rise goes beyond our comfort level, we will have no other choice but to pass it on to the customers.

Non-performing assets have been a cause of concern in the quarterly results announced by the banks. Keeping in mind the moderated growth, how do you plan to manage the asset quality?
We are addressing the issue and trying to recover. Now on, we will be careful about our customer and product selections. We are confident of being able to do a good job this year. Just wait for the results.

There have been talks that non-banking financial companies (NBFCs) will be given banking licences in the near future. Do you think that will make competition tougher for the existing core banking industry?
India is a fairly large market. In a country of 1.12 billion, more than 50 per cent people do not have bank accounts. A large part of the market still remains untapped with several villages and towns not having even a single bank branch. In such a situation, I feel if NBFCs are given banking licences that wouldn't be a problem at all.

How is UCO bank planning to achieve financial inclusion and literacy?
Many people do not utilise the banking facilities as they are not aware of the products offered. Hence, for the purpose of financial literacy, we have set up some financial learning and counselling centres and are looking to set up more. We are supposed to identify the villages for setting up rural branches according to the Planning Commission. We have a target of covering 1,800 to 2,000 villages and have already covered between 1,000 and 1,200. Hopefully, we will meet our target by next March.