Union Bank of India has about Rs 55,000 crore of loan proposals under various stages of approval which should help it to clock a credit growth of 12% in FY24, the top executive of the bank said. 

This is over and above the loan originations that happen at the branch level. 

The robust pipeline of loan proposals and the room available to reprice its assets will help the state-owned lender to keep its net interest margin (NIM) steady at over 3% during the year.

“We will be able to maintain our NIM at the same level as we have about Rs 2.80 lakh crore of loans for repricing. So, each quarter we have a quantum of loans which is linked to the MCLR (marginal cost of funds-based lending rate) which will come up for repricing. We have only passed on 140 basis points of the rate hike,” Union Bank of India managing director and chief executive officer A Manimekhalai said.

The bank repriced only 50% of the loans linked to its MCLR following the 250 basis points hike in repo rate by the Reserve Bank of India (RBI) since May 2022.

The bank’s credit growth will also be supported by a strong loan sanction pipeline. The bank said that Rs 35,000 crore of loans are under various stages of disbursal and Rs 20,000 crore of loans have got term sheet approvals.

The gross advances of the bank grew by 13.05% to Rs 8,04,015 crore in the fiscal fourth quarter ended 31 March 2023. Of this, retail assets were at Rs 1,59,702 crore while corporate loans stood at Rs 2,88,322 crore. 

The growth is coming from a wide spectrum of sectors including infrastructure, non-banking financial companies (NBFCs) and HFCs (housing finance companies), textiles, steel, chemicals and road projects (HAM-Hybrid Annuity Model) where 40% of the cost is borne by NHAI (National Highways Authority of India) and 60% by the developer.

“The digital initiatives have also helped us grow the business. In three years’ time, the bank is looking at 50% loan originations via its digital channels and also augmenting CASA (current account savings account) growth. Since digital penetration is still low, we see an immense opportunity for growth,” Union Bank of India executive director Nitesh Ranjan told analysts. 

The bank is planning to mobilise about Rs 1 trillion of CASA through its digital channels.

Union Bank of India has a number of centralised processing units which help in loan originations and disbursals. It has also created a vertical for the resolution of stressed assets. 

For expanding its credit growth, the lender has set up 26 MSME (micro, small and medium enterprises) Loan Points, 105 Union MSME First Branches,160 Retail Loan Points, 1,331 Gold Loan Points, 9 SAMBs (stressed asset management branches), 21 Asset Recovery branches, 14 large corporate branches and 56 mid-corporate branches. 

Union Bank of India has 8,580 branches and around 10,835 ATMs. About 30% of the branches are in rural areas and 29% in semi-urban centres. The urban branches comprise about 20% of the total network while the metro has 21% branches.

In the quarter ended March 2023, the bank’s advances to agriculture, marginal farmers and micro enterprises are all higher than regulatory requirements. The lender’s priority sector lending achieved 42.45% of the total assets, above the RBI-mandated requirement of 40%. 

The bank has guided for an 8-10% deposit growth in FY24. The aim is also to bring down the gross non-performing assets (NPAs), with slippages expected to be at about Rs 12,000 crore and gross recovery at Rs 16,000 crore for the current fiscal.