In an exclusive conversation with B&E’s Mona Mehta, M. V. Nair, Chairman and Managing Director, Union Bank of India (UBI), talks about the expected growth of the bank in the coming year and the initiatives UBI is planning to take to make retail lending more consumers oriented.
B&E: Is Indian banking industry ready enough to handle the situation if the economic scenario depletes further and the world goes for a second recession?
M. V. Nair (MVN): In the global context, India is the second fastest growing economy (out of the large-sized countries) and has a well-balanced economic structure. It is not highly dependent either on foreign financing or foreign demand, as some other countries. Its banking sector is well capitalised and enjoys a strong deposit franchise. Moreover, Reserve Bank of India has always shown a high degree of flexibility and responsiveness during the past phases of global crisis. So even if the economic scenario depletes further, our banking industry and its regulators would handle the situation well.
B&E: UBI has recently increased its deposit rates by 0.25-1% across various maturities. The bank has also upped the benchmark prime lending rate (BPLR) by 0.5% to 12.25% from 11.75%. How will this impact UBI’s margins going forward?
MVN: During second half of the previous year loan growth was better than the RBI’s indicative projection and was outpacing the deposit growth of banks. This also led to structural liquidity deficit and warranted higher incentive for savers. Thereafter banks augmented the pace of deposit rates cycle which yielded favourable response from the public. While the lending rate also increased, they lagged behind the deposit rates in quantum terms. Secondly, we have also experienced that deposits contracted at lower rate in earlier period have higher propensity for repricing during increasing interest rate cycle. Thus, margins will definitely be impacted. Factoring this, we have indicated net interest margin (NIM) of 3.20% for the current fiscal compared to 3.33% in the previous year.
B&E: UBI’s gross non-performing assets (NPAs) declined from 2.79% in September 2010 to 2.68% in December 2010 and further to 2.37% as on March 31, 2011. How do you expect the bank to perform on this front this fiscal?
MVN: Our NPAs had peaked in September 2010 when gross NPAs to gross advances ratio was 2.79% and slippages for the quarter were Rs.1,130 crore. There was a steady decline in slippages to Rs.765 crore in Q3 and then to Rs.406 crore in the last quarter of the previous fiscal. Consequently, our gross NPAs stood at 2.37% as on end-March 2011. Hereafter, asset quality has positive outlook and we see gross NPAs at around 2.0% by March 2012.
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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age WomanIIPM's Management Consulting Arm-Planman Consulting
B&E: Is Indian banking industry ready enough to handle the situation if the economic scenario depletes further and the world goes for a second recession?
M. V. Nair (MVN): In the global context, India is the second fastest growing economy (out of the large-sized countries) and has a well-balanced economic structure. It is not highly dependent either on foreign financing or foreign demand, as some other countries. Its banking sector is well capitalised and enjoys a strong deposit franchise. Moreover, Reserve Bank of India has always shown a high degree of flexibility and responsiveness during the past phases of global crisis. So even if the economic scenario depletes further, our banking industry and its regulators would handle the situation well.
B&E: UBI has recently increased its deposit rates by 0.25-1% across various maturities. The bank has also upped the benchmark prime lending rate (BPLR) by 0.5% to 12.25% from 11.75%. How will this impact UBI’s margins going forward?
MVN: During second half of the previous year loan growth was better than the RBI’s indicative projection and was outpacing the deposit growth of banks. This also led to structural liquidity deficit and warranted higher incentive for savers. Thereafter banks augmented the pace of deposit rates cycle which yielded favourable response from the public. While the lending rate also increased, they lagged behind the deposit rates in quantum terms. Secondly, we have also experienced that deposits contracted at lower rate in earlier period have higher propensity for repricing during increasing interest rate cycle. Thus, margins will definitely be impacted. Factoring this, we have indicated net interest margin (NIM) of 3.20% for the current fiscal compared to 3.33% in the previous year.
B&E: UBI’s gross non-performing assets (NPAs) declined from 2.79% in September 2010 to 2.68% in December 2010 and further to 2.37% as on March 31, 2011. How do you expect the bank to perform on this front this fiscal?
MVN: Our NPAs had peaked in September 2010 when gross NPAs to gross advances ratio was 2.79% and slippages for the quarter were Rs.1,130 crore. There was a steady decline in slippages to Rs.765 crore in Q3 and then to Rs.406 crore in the last quarter of the previous fiscal. Consequently, our gross NPAs stood at 2.37% as on end-March 2011. Hereafter, asset quality has positive outlook and we see gross NPAs at around 2.0% by March 2012.
Read more.................
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age WomanIIPM's Management Consulting Arm-Planman Consulting
but as studies now confirm, it has supported the spread of hatred globally. A study released by the Jewish human rights group, Simon Wiesenthal Centre, exemplified that the abuse of sites, social networks, blogs and video sharing has spread more hatred and violence in the world in the recent years. The study found a 30% increase of sites (now running over 3000) that spread hatred. The recent Latvian documentary, ‘The Soviet Story’, which compared communism with fascism, agitated the Kremlin government; thousands of ‘suicide bomber’ games in America, which show the generic bearded ‘Muslim’ enemy, have been enraging Muslims globally; border petrol games, which aim to kill innocent Mexican immigrants migrating to America, are plucking their patience, and so on so forth.
ural defect afflicting hybrids is their pricing. It could well turn out that unless auto companies ensure that the pricing levels of offered hybrids are in tune with mass market expectations – especially in markets like India and China, expected to be the world’s top two in the next five to ten years – they might well start failing. Hybrids are simply not cost effective, and will not be in the next seven to ten years, if at all then. A hybrid, to be rampantly successful, has to be priced in such a range that enables the consumer to perceive its ‘long term’ cost effectiveness over the ‘short term’, thus engaging his buying intent. Confusing? For better clarity, read what Deputy Editor Virat Bahri writes later on in the cover section: “Doubts are often raised about how cost effective hybrids really turn out to be. NuWire Investor’s Cali Zimmerman compared the [price of the] Toyota Camry hybrid with the normal version, and statistically proved that the cost difference cannot be recovered before 13.8 years!!! Even the first hybrid to be introduced in, say, a poor country like India – the Honda Civic – costs a huge Rs.18-22 lakhs.” How does one expect consumers in a poverty-ridden country like India (with per capita GDP just around $1000) to buy such a costly car? Isn’t it then quite a no-brainer issue to say that a hybrid, by its very definition, loses its USP once it is priced higher than even normal cars? Amusingly, not when you look at it from the perspective of billion dollar corporations who refuse to wink when drunk.
the state of affairs in the FMCG sector. It takes some of the country’s best marketing minds to research extensively on customer behaviour and prepare a ‘fool proof’ strategy to win in the market place. Millions are spent on advertisements, quite often with the ‘celebrity price tag attached’, managing distributor relationships, sponsorships, PR initiatives, et al. And when the product reaches the point of purchase, the time that the customer may take to bring this entire exercise to naught (by rejecting the product of course), could be not more than a fraction of a second. Like we said, criminal!
There is a good chance it will be after the Supreme Court asks the UPA government to consider holding an Archaeological Survey of India (ASI) investigation to ascertain whether Ram Setu is indeed an “ancient monument”. A bench headed by Chief Justice K.G. Balakrishnan asked the government to explore “the possibility of carrying out the project through any other channels (alignments).”
third largest oil producer in the region, yet busted by the ruthless MNCs – that’s Sudan for you! Be it for economic exploitation or for geo-political importance, ‘infamous’ Sudan has always been in the news. Most developed countries had held this country under subjection for their selfish interests. But what does anyone do about it except of course, slamm on its face a ‘demeaning’ Human Rights Violation Report or (at best) exploit its resources (thanks to the likes of MNCs from India, China, Malaysia et al). The Darfur conflict in Sudan has triggered a genocide of sorts, wherein 2,00,000 people died in the conflict and 9,000 people were killed. What’s worse, other countries are taking advantage of this surreal situation!
Balkans back on EU’s agenda. Unless EU acts quickly, the whole region could slide backwards, with dire social, economic & security consequences. The EU needs a comprehensive regional approach, focusing on the remaining steps that would lead each country towards membership.
increasing action by every passing day, as existing players challenge the almighty status of Apple iPod. Microsoft which has been silent for quite some time now is all set to get people into the groove with an upgraded version of its player Zune. Microsoft has unveiled three new models of Zune, which would be available in the US by mid-November. It consists of Zune 80GB hard-drive model, with a 3.2-inch screen, priced at $249.99. The other offerings are Zune 4GB space, (priced at $149.99) and Zune 8GB (priced at $199.99). Another addition in these new Zune devices is the touch-sensitive Zune Pad navigation button. A wireless sync has also been added that allows Zune devices to automatically sync over the device owner’s home wireless network when connected to an AC adaptor in a speaker dock accessory.
for K. V. Shridhar is one of the best brains at Leo Burnett who incessantly keeps rolling out great positioning ideas for brands and incredible ad campaigns to match. His unbeatable quality – to get the best out of every individual. The year 2007 saw the maverick ad guru deliver stunning campaigns for RCOM, Thums Up and many others. He’s one you’d really want to meet.