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: Your retail lending portfolio grew over 28% (y-o-y) last year. In fact, it’s around 11% of your total loan book at present. Are there any plans on the anvil to expand it further this fiscal?
MVN: UBI is focused on increasing its retail loan portfolio. There is a huge opportunity in retail loan segment due to favourable demographic profile, increasing migration to urban centers and a general rise in consumer aspiration. The retail penetration in India, measured by retail loans to GDP ratio, is about 9.5%, quite lower when compared to mature markets where this ratio ranges from 15 to 20. Considering this potential, UBI is gradually building a robust retail lending model. In fact, today we have 46 specialised branches called, ‘Union Loan Points’ for retail loans. These branches have exclusive focus on retail loans and also leverage the lead management technology for converting the leads from other branches into real business. We are also offering specific loan products in order to meet the customised needs of various segments. Today, technology can be leveraged in many ways and one interesting thing can be tracking the number of products availed by an average customer and then cross-selling to those whose availment is below the average. We are gradually building this capability that would provide us advantage in deepening the retail lending customer base.
B&E: What about UBI’s rural presence? How do you plan to augment it further?
MVN: Rural and agricultural banking are significant areas of priority for the bank. Almost 55% of our branches are located in centers which cater to the needs of people whose livelihood is dependent upon agriculture and allied activities. Going forward, bank will open significant number of branches in rural centres in order to facilitate meaningful financial inclusion. This will include at least 25% of new branches in unbanked rural centres (Tier 5 & Tier 6). Any one technology can not suffice the needs of rural areas due to the locational issues and different comfort of the people for a particular technology. Therefore, UBI is using a host of technology platforms to reach out to the masses. This includes biometric cards, ATMs and mobile banking. In fact, we have recently tied up with Nokia for our co-branded product ‘Union Money’. Under this a person can transfer the money, pay his utility bills just by visiting any Nokia outlet. Then there are business correspondents who reach out to the people using biometric card technology.
B&E: Your expansion plans for the current fiscal...
MVN: UBI today has more than 3,000 branches and nearly 2,700 ATMs across the country. There is still vast scope for deepening our presence in pockets of emerging growth centres. In FY 2012, a total of 400 branches are likely to be opened. Of the new branches, significant share will be for branches in hitherto under-banked centres. Similarly, we are planning to increase our ATMs to 5,000 by end of the current fiscal. As far as international expansion plans are concerned, UBI would expand in select geographies. Presently, the bank has approvals from the Reserve Bank of India (RBI) for converting the representative office in London (United Kingdom) into a subsidiary and representative office at Sydney into a branch. The bank also has approvals for opening a branch each in Antwerp (Belgium) and Dubai International Financial Centre and representative offices at Johannesburg (South Africa) and Toronto (Canada). The process of obtaining approvals from the respective foreign country regulators are at various stages.
MVN: UBI is focused on increasing its retail loan portfolio. There is a huge opportunity in retail loan segment due to favourable demographic profile, increasing migration to urban centers and a general rise in consumer aspiration. The retail penetration in India, measured by retail loans to GDP ratio, is about 9.5%, quite lower when compared to mature markets where this ratio ranges from 15 to 20. Considering this potential, UBI is gradually building a robust retail lending model. In fact, today we have 46 specialised branches called, ‘Union Loan Points’ for retail loans. These branches have exclusive focus on retail loans and also leverage the lead management technology for converting the leads from other branches into real business. We are also offering specific loan products in order to meet the customised needs of various segments. Today, technology can be leveraged in many ways and one interesting thing can be tracking the number of products availed by an average customer and then cross-selling to those whose availment is below the average. We are gradually building this capability that would provide us advantage in deepening the retail lending customer base.
B&E: What about UBI’s rural presence? How do you plan to augment it further?
MVN: Rural and agricultural banking are significant areas of priority for the bank. Almost 55% of our branches are located in centers which cater to the needs of people whose livelihood is dependent upon agriculture and allied activities. Going forward, bank will open significant number of branches in rural centres in order to facilitate meaningful financial inclusion. This will include at least 25% of new branches in unbanked rural centres (Tier 5 & Tier 6). Any one technology can not suffice the needs of rural areas due to the locational issues and different comfort of the people for a particular technology. Therefore, UBI is using a host of technology platforms to reach out to the masses. This includes biometric cards, ATMs and mobile banking. In fact, we have recently tied up with Nokia for our co-branded product ‘Union Money’. Under this a person can transfer the money, pay his utility bills just by visiting any Nokia outlet. Then there are business correspondents who reach out to the people using biometric card technology.
B&E: Your expansion plans for the current fiscal...
MVN: UBI today has more than 3,000 branches and nearly 2,700 ATMs across the country. There is still vast scope for deepening our presence in pockets of emerging growth centres. In FY 2012, a total of 400 branches are likely to be opened. Of the new branches, significant share will be for branches in hitherto under-banked centres. Similarly, we are planning to increase our ATMs to 5,000 by end of the current fiscal. As far as international expansion plans are concerned, UBI would expand in select geographies. Presently, the bank has approvals from the Reserve Bank of India (RBI) for converting the representative office in London (United Kingdom) into a subsidiary and representative office at Sydney into a branch. The bank also has approvals for opening a branch each in Antwerp (Belgium) and Dubai International Financial Centre and representative offices at Johannesburg (South Africa) and Toronto (Canada). The process of obtaining approvals from the respective foreign country regulators are at various stages.
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 Woman
IIPM's Management Consulting Arm-Planman Consulting
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 Woman
IIPM's Management Consulting Arm-Planman Consulting
