Consumer Finance In Cross-Hairs

In fiscal 1997-98, the Union Bank of India (UBI) will be targeting consumer financing as corporates continue to shy away from banks.

Further, the banking system is saddled with liquidity, whose deployment is posing a serious problem. As a result, the scope of making profits in the inter-bank call market is also not available.

Hence, consumer financing is the best available option for the bank to save its bottomline for the current fiscal , said UBI chairman and managing director A T Pannirselvam.

The focus on consumer finance as a niche area is an attempt to protect its bottom line for the current fiscal as there has been a fall in its advance portfolio during the first quarter of 1997-98. The banks non-food credit has dipped by nearly Rs 100 crore in the first 3months. Consumer finance will be made available through UBIs savings special branches (SSB).The bank plans to increase its specialized branches to from 113 to 400 during 1997-98. Of the 113, SSBs accounted for 90 branches.

 

Despite the relaxation of maximum permissible bank finance (MPBF) by the Reserve Bank of India in its monetary policy announced in April, corporates are not coming forward

to avail credit, said Pannirselvam. The bank has already commenced lending under consumer finance schemes at interest rates of around 17 to 18 per cent.

This segment assures that our funds will not be idle. We were the front runners in reducing ourPLR. Even with PLR at 14 %corporates are not willing to avail credit.The core industries like cement and steel are not doing well.

Further, infrastructure industry will not receive a boost this year as the finance minister has said that reduction of fiscal deficit will be a priority.

Hence, there is little hope that non-food credit will pick up even in the second half of the year, the chairman said.