Union Bank sees pick up in home, auto loans

State-owned Union Bank of India expects growth in home, auto loan portfolios to pick up in the period ahead, but said it may not achieve the targeted credit growth of 25 per cent in FY10.

The bank had targeted a growth of 25 per cent in the present fiscal but may end up in the range of 20-22 owing to the difficult market conditions, Union Bank of India Chairman and Managing Director, M V Nair told reporters here.

"We had targeted a loan growth of 25 per cent in this fiscal. But in the present conditions, this is difficult to attain. Our credit is currently growing at 18.3 per cent. For the full fiscal, we may achieve 20-22 per cent," he said.

 

The bank has witnessed a healthy increase in credit off take in home, auto loans and expects the trend to improve in the coming months, Nair said.

"Our expectation is that the home loans will pick up in the next few months. There is a good demand for home loans. Auto loans have also started picking up," he said.

The bank expects its deposit portfolio to grow by 20-22 per cent in the current fiscal, Nair said adding that interest rates in the industry will remain stable till December and may go up later if the credit growth picks up.

Though there were fears in the market that government borrowing may result in liquidity issues in the system, current signals indicate that it will not have any major impact, Nair said.

Asked whether a weak monsoon may impact the growth of economy and create more bad loans in the banking system, Nair said, "it is too early to comment on the impact of monsoon."

The public-sector lender, which has a tier-II headroom of Rs 2,500 crore might raise around Rs 500-crore by September.

The bank has been implementing strategies to grow its fee-based income over the past few years and has witnessed a 40-45 per cent core fee-based income year-on-year, Nair said.

The bank has invested around Rs 332 crore over the past five years on the technology side including the implementation of core banking solution.

It aims to migrate 35 per cent of its total business to core banking solution by end-fiscal, he said.

Presently, 27 per cent of the bank's business is carried out through CBS.

Commenting on the decision of RBI to put a cap of Rs 10,000 on third party ATM transactions and limit the free transactions to five a month, Nair said banks are yet to take a view on the matter.

"We are yet to take a call on the matter, RBI has left that issue to the decision of banks," Nair said.

As part of its expansion plans, Union Bank has plans to launch lobby banking in about 100 branches across the country while it will dedicate another 300 branches for relationship banking, Nair said.

The lender has also brought two of its Regional Rural Banks (RRBs)— Kashi Gomti Samyut Gramin Bank and Rewa Sidhi Gramin Bank — under CBS, Nair said.

Union Bank, in association with Banglore-based International Institute of Information Technology today released a report on technology-led transformation of Indian banks.