'Govt may infuse Rs 950 crore in Union Bank': D Sarkar

Q&A with Union Bank of India chairman

Mumbai-based Union Bank of India sees interest rate to soften going ahead and the bank may reduce lending rates further at a time when credit pick up is sluggish. In an interaction with Vrishti Beniwal, the bank’s chairman and managing director D Sarkar discusses issues related to asset quality, and business growth. Excerpts:

How has been the year so far for your bank and what do you expect going forward in terms of business growth?

We are expecting our deposits to grow at 14-15 per cent and advances at 17-18 per cent this year. After seeing December quarter figures we may moderate the targets a little bit if necessary, but so far we are maintaining the same rate of growth.

What is your outlook on interest rates for your banks as well as the banking sector as a whole?

Interest rates may soften a little bit and everybody is talking about it. RBI has also said it may do something in last quarter. So a possibility is there to bring down the rates.

Can we expect a rate cut from banks before the last quarter?

Some of the banks have already reduced the rates and we are also considering it. I can tell you reduction of 10-15 basis points is possible.

What is the situation of non-performing assets as far as your bank is concerned?

Our gross NPAs were 3.66 per cent at the end of September quarter. We are hopeful that we will be able to reduce it sequentially.

Banks are seeing an increase in debt restructuring this year. How much is the increase in your case?

We have restructured assets of Rs 2,400 crore in the last six months. Another Rs 2,200 to Rs 2,300 may be restructured in the remaining part of this financial year.

Which sectors are mainly contributing to this growth in loan recast?

Mainly some of the companies in power, steel and hotel are going for debt restructuring.

Where do you see your net interest margin settling down at the end of the year?

We are trying to maintain it at 3 per cent and I’m hopeful we will be able maintain at that level, but not below 3 per cent.

What are your capital raising plans for this year?

We have asked the government for Rs 950 crore. The government is indicating that very shortly it will infuse the capital. It is under active consideration of the finance ministry.

Do you plan to go to the markets for raising capital?

We don’t have any such plans till March 2013. After that we can think about it.

Do you think consolidation is the way to go forward if Indian banks have to reach scale?

We have been hearing about consolidation for last four to five years but nothing has happened so far. If something happens we are ready for that.

The finance minister said the proposal will have to come from board of banks?

He said some consolidation has to come. I feel during a course of time it will happen if we need a big banking giant in our country.

Union Bank is one of the largest public sector lenders. Are you looking at some smaller banks?

At the moment we are not looking at any banks. This is only a beginning of the dialogue. Let the things get clear first.