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

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.

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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 Woman
IIPM's Management Consulting Arm-Planman Consulting

The only option in that case for Iran is to be nuclear armed to save itself from NATO and Israel!

Without Syria, the isolation of Iran would be certainly complete! Iran would be without any friends in the sea of Arab countries (& Turkey, which is also a US ally) surrounding it. In any case, Iran is bleeding from the cumulative influence of sanctions – which have cost them between $25-30 billion – and hundreds of companies have moved out! It would be an easy pawn for NATO and Israel if they resort to military aggression and turn it into a US protectorate as they have done for Afghanistan, Iraq & Libya.

Under these circumstances, possession of nuclear weapons is a necessary evil for Iran, which will act as a deterrent to the forward deployments of NATO and Israel in the region. It will also presage a strategic leverage in the region to offset (at least to some extent) American influence against the country. Nuclear weapon capability is being cited as a vindication for a war on Iran. But if Iran can manage a bit of real posturing, it may be able to defend itself. Of course, that is only relevant if it genuinely sticks to the posturing part of the deal!

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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 Woman
IIPM's Management Consulting Arm-Planman Consulting

My way or the highway

Hugo Chavez has all the machinery to win the election. If not by popularity, he can certainly win by manipulations!

The President of Venezuela, Hugo Chavez, looks to be facing some of his most difficult years. He is already afflicted with numerous unknown ailments as per reports and he also faces a much stronger challenge for the next Presidential election. An excited and unified opposition was seen recently on a live TV show. They talked about drug trafficking, inflation, unemployment and the plaguing lack of investment. They also talked about how they will deploy effective strategies to generate around 500,000 jobs and educational reforms. But are these rabble rousing antics enough to defeat Chavez?

Despite his misrule, Hugo Chavez’s stringent anti-American stance still has a powerful connect with the poor. Chavez also has a reputation when it comes to withdrawing funds from the state’s exchequer – as he did in 2009 by siphoning off $12 billion – for his campaign trail. Intimidating voters is also one of his favourite ways to undercut the opposition – he influenced a massive 5 million civil servants to vote for him with the politics of fear! He took rigging to a new level when he included 1 million fake electorate names. No one can dare contest them as he stonewalls all auditors (including international auditors) in the name of privacy! If, after all these measures – the opposition does win – there is every likelihood that he will debar them on some pretext. He barred Leopoldo Lopez from holding public office – when he won the post of Mayor in greater Caracas in 2008.

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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
IndiaManagement Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting

Power above law?

Bails given out in the 2G spectrum retell the sordid saga of how the rich & the elite control power in India

As estimated by the CAG report, the second Generation (2G) spectrum allocation scam, the biggest recorded swindle ever in India, has cost the exchequer a mind boggling Rs.1.76 trillion. It revealed the ugly face of corruption in India bang in front of media and public glare. Interestingly, the recent turn of events on the legal front has further highlighted the main reason why this scourge in our society can only get worse.

The CBI had accused fourteen people in the scam but twelve of them have already been granted bail under certain conditions within a short span of time. Only former telecom minister A. Raja and former telecom secretary Sidharth Behura are still in prison pending trial. DMK chief Karunanidhi has shamelessly announced that the party will be looking forward to welcome his daughter Kanimozhi with a new position. Even R. K. Chandolia, former private secretary of A. Raja, was released from jail one day prior to the High Court bail order. These court decisions have led many to make the hopeless conclusion that punitive action towards corrupt politicians and bureaucrats & unethical corporates is really hard to come by in India.

A study by the Asian Development Bank concluded that the wealth of 50 Indian billionaires equals 20% of the country’s GDP. The doyens of Indian industry often come under scrutiny for their connections in the bureaucracy and the government and how they use them to their advantage.  

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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
IndiaManagement Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting

Application of the FCFS principle was faulty

Rajan S Mathews, Director General, Cellular Operators Association of India (COAI)

B&E: Does the SC judgement on 2G spectrum scam reflect on how telecom players did business in India?
Rajan Mathew (RM): I do not think that is fair to say. Companies usually react to what the government puts out. Government enunciates the methodology and companies respond to it. This is not to say that companies do not act inappropriately. There have been instances when we have left the matter to courts, investigating agencies and vigilance, to determine who acted appropriately and inappropriately, legally or illegally.

B&E: The apex court’s judgement is very stern. Do you see clarity in terms of where the industry is headed?
RM: There is clarity in terms of where the industry will go. However, there is lack of clarity on some aspects of implementation of the order. The Supreme Court has said that the first-come-first-serve principle applied was faulty. The way to go forward is the auction. We support auction but FCFS, inherently, is neither good or bad. The SC says it is open to abuse. A lot of aspects of life like getting a train ticket is based on the concept of FCFS. The notion of FCFS is not flawed. What the court basically said is that when it is applied to this issue of scarce natural resources, then we have to adopt a methodology that ensures citizens’ interests and maximises value.

B&E: There are apprehensions that FDI flow will take a hit in the telecom sector after the judgement. What do you say?
RM: We have been seeing the actual impact. Those players whose licences were cancelled, their stocks took a beating and for those with licences, their stocks went up. The investors are saying, “we want clarity.”

B&E: Is that the lesson you draw from the entire judgement?
RM: There are some key factors that investors look for - predictability, clarity, certainty and transparency. If any of these canons is put to risk, investors gets nervous. In this particular instance there was no clarity. On the issue of predictability, we have an independent judiciary that will step in. That is what happened when there was lack of will to fix the problem, which is good news. Investors invariably look to the judiciary for adjudicating on matters of contractual obligations. If investors get nervous about contractual obligations, that’s a worry.

B&E: What about the telecom players whose licences have been cancelled?
RM: The Supreme Court says that the contracts itself have been one-sided. Let me illustrate. Even if you buy a stolen car in good faith, the law says you have to return it back to the rightful owner. On the issue of the 2G scam, the government itself did not repudiate the licences. The telecom players are innocent. Protect them. But if the court and investigating agencies find operators’ conduct wrong, bring them to book. But give them a hearing in the court. Don’t do things arbitrarily.

B&E: On the issue of re-auctioning of the 2G spectrum, the government expects a huge windfall . With telecom players already having paid so much for BWA and 3G, is that kind of money really available with them?
RM: I don’t think that kind of money is available with domestic players. That is why the government itself indicated that it would raise the FDI limit in the sector to 74%. Government knows that the aggregate has to come from international investors. If you look at the 12th Five Year Plan proposals for the telecom sector, the preliminary numbers put out by the Planning Commission suggest Rs. 6,500 billion as the outlay for rolling out various initiatives by government. They themselves admit that 80% of that will have to come from international sources.

B&E: Will companies like to go for bidding when the incumbents already have sufficient spectrum?
RM: First of all, people should not expect the kind of prices that came from 3G. 3G had artificial scarcity built into it. The 750 MHz is coming out by the end of the year. This was not the case in the first round of auction. So the whole scarcity and time frame of spectrum has been made clear. Given all these issues, I don’t expect to see sky-high prices. Will it be more than Rs. 10.65 billion? Probably, because new entrants will come. So you will see robust but reasonable bidding.

B&E: TRAI, the sectoral regulator has invited comments from stakeholders on the issue spectrum allocation. What are your expectations on the same?


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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
IndiaManagement Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting