IBSPECIAL

Winds of change are blowing at Union Bank of India. Nestled in the heart of Nariman Point not far from the Arabian Sea in Mumbai, the country’s fifth-largest nationalised bank has got its first woman CEO after over 102 years of existence. There is new aggression as she talks of acquisitions, taking the bank to the third spot and creating branch verticals to treat bad loans and mobilise credit.

Just two months old in the bank, A Manimekhalai knows she has a challenging task at hand as she strategises to bring down its high non-performing assets (NPAs), post a double-digit credit growth in the current fiscal amid tough conditions, and introduce organisational changes. The daughter of an army officer, she realises that the anchor bank has also to be a melting pot of cultures ever since Andhra Bank and Corporation Bank merged into it in April 2020. 

Manimekhalai identifies with Santiago, the poor Spanish shepherd boy in her favourite book ‘The Alchemist’, who chases dreams, seizes opportunities and learns to tackle obstacles that come his way. “There is a lot to be done in every segment. Hard work and commitment to one’s goals are the only ways to success. Luck comes and goes,” she quips. 

A voracious reader, her other favourite books are the Indian epics. Bhagavad Gita, she says, has intense lessons in management and guides her at work. These books have influenced her working style since she started her career in 1988 at Vijaya Bank and then moved on to play a pivotal role as executive director of Canara Bank in the amalgamation process with Syndicate Bank. 

Manimekhalai also loves to read Harper Lee’s Pulitzer Prize-winning novel ‘To Kill a Mockingbird’. Like Atticus Flinch, the protagonist’s father in the book, she stays with her feet on the ground and sticks to her beliefs. She tells everyone in the bank to do the same: to stay committed to their goals, shake off their inertia and go out and build relationships with the people for better customer service.

“For a good banker, it is essential to get out of the comfort zones of the office and be connected with the people. That is how you can know their needs and offer better customer service,” she says.

In one of her first initiatives as head of the bank, Manimekhalai is inviting millennials for town hall meetings to get a feedback on their aspirations. Already conducted in Mumbai, Bengaluru and Hyderabad, these meetings attracted millennials who wanted a digitally savvy bank with fast turnaround time. “We need to change our mindset as an organisation. We want to reach out to aspiring young Indians to see how we can cater to their needs,”  says Manimekhalai, whose son works as a software engineer in Dublin.

An area of concern for the new managing director and CEO is the bank’s NPAs, which is one of the highest in the industry. She categorically rules out write-offs as a strategy even as she looks to bring down gross NPAs to less than 9% this fiscal from the current 10.22%. As of 30 June 2022, gross NPAs of the bank stood at Rs 74,500 crore. Net NPAs are expected to fall below 3% from 3.31%.

“Cash recovery and upgradation will be the focus. We prefer upgradation to OTS (one-time settlement) or a write-off. Our gross NPAs are at 10.22%. We are planning to bring it down to less than 9%,” she says.

There is another plan to widen the settlement mechanism with the bank’s borrowers. “We have even activated our law officers at the DRT (Debt Recovery Tribunal) and SARFAESI (securitisation and reconstruction of financial assets and enforcement of securities interest) to work out settlements so that we have something coming from there as well,” she reveals.

The stressed assets management vertical will also be strengthened, with the number of dedicated recovery branches increasing to 19 from the current strength of 15. “Every zonal office will have an asset recovery branch,” she says.

Manimekhalai uses a lot of data points to work out her strategy. Union Bank of India has close to 30 stressed asset management branches (SAMB) and asset recovery branches (ARBs), which account for 85% of the bad loans. Of the bank’s total 8,729 branches, its senior executives need to focus on only 10 SAMB and 18 ARBs. While SAMB handles NPAs of Rs 25 crore and above, ARB deals with NPAs from Rs 20 lakh to Rs 25 crore. The plan is to increase the SAMB and ARBs to a combined strength of 40 so that they get focussed attention. 

“We are creating a verticalisation of branches strategy. While the SAMB and ARBs are for stressed loans, we are also having credit-focused branches,” she said.

Under this structural flow, Manimekhalai expects to recover Rs 15,000 crore of bad loans during the current financial year while slippages would be around Rs 13,000 crore. In the April-June quarter, the bank’s recoveries stood at Rs 1,481 crore compared to Rs 1,147 crore a year ago. Fresh slippages during the quarter stood at Rs 3,714 crore compared to Rs 5,263 crore a quarter ago.

For pushing credit growth in a tough economic environment, the bank will create a number of verticals to give focused attention to the segments. With interest rates moving upwards, Manimekhalai sees loan growth coming from segments like small corporates, micro, small and medium enterprises (MSME), agriculture and retail. She is targeting a double-digit credit growth in retail and government schemes this year. The bank, she believes, will attain its priority sector targets as it lends to specific government schemes like animal husbandry, dairy, fisheries and compressed biogas. 

Union Bank of India will also concentrate on infrastructure project loans while seeking to improve the asset quality. Corporate forms 45% of the bank’s total credit portfolio while loans to the retail, agriculture and MSME sectors account for the remaining 55%.

“We plan to ramp up the RAM (Retail, Agriculture and MSME) sector to 57% of our credit portfolio by the year-end. We will focus on the new growth engines like education, gold and attractive government schemes,” she avers.

Home loans will comprise a big chunk of the bank’s retail book growth. “The vehicle loan portfolio is doing well and we intend to keep up the tempo,” she says. 

Manimekhalai realises that 550 branches account for around 90% of the advances. The focus on these branches would keep the loan book healthy. The bank plans to increase its MSME-focussed  branches from 70 to 150. An expansion of mid-corporate branches (MCBs) from its current strength of 31 is also planned. MCBs handle loan proposals ranging from Rs 50 crore to Rs 250 crore. 

More large corporate branches (LCBs), which focus on loan proposals of Rs 250 crore and above, are to be opened. Manimekhalai says the verticalisation of operations has started. 

Education loans is an area where Manimekhalai wants to see higher growth. She has decided to have a separate vertical for education loans, with a dedicated team overlooking the portfolio. Education, she says, is an important area of socio-economic mobility for students and banks need to provide funding to support the aims and aspirations of the country’s youth. 

Apart from the social role education loans play, Manimekhalai is looking to scale it up to double its current size. Union Bank of India’s education loans had a total outstanding of Rs 7,350 crore at the end of March 2022, forming 5.4% of its retail assets. “We are looking to double our education loan portfolio by the end of this fiscal as we explore opportunities to lend to students studying in premier institutes and in foreign colleges and universities,” she says. 

Targeting the upper segment of the education loan market is going to be a part of the bank’s strategy. “Education and gold loans will be our thrust areas. We are introducing better loan packages for those studying abroad and in premier colleges,” she elaborates. 

The bank is offering collateral-free loans to students from premier institutes like Indian Institute of Technology (IIT) and Indian Institute of Management (IIM). For students studying abroad, the bank has shortlisted 100 universities and select courses where it is willing to provide collateral-free loans of up to Rs 40 lakh. Higher loans will also be disbursed based on the merits of the credit requirement.

Being quicker in disbursing loans is going to be key. Union Bank of India recently disbursed loans to students in IIM Indore where the parents were carrying sanctioned letters from another public sector bank. “We camped in the college and dispensed loans in 10 minutes. It is not the quantum of loan that matters but how fast it can be disbursed. The turnaround time is critical,” says Manimekhalai.

Banks are generally wary of scaling up the education loan portfolio as it generates higher NPAs. As students move out of their study places to work, it becomes difficult to locate them. But Manimekhalai is not unduly worried. “To prevent NPAs in this segment, we are having a number of safeguards. We take Aadhaar cards, account numbers of parents, mobile numbers, etc. I have been running the whole gamut of credit functions at Canara Bank so I know how it works,” she says.

Manimekhalai has an ambition to make Union Bank of India the third-largest public sector bank in the country. This should be in terms of profitability, net interest margin, NPA ratio and capital to risk-weighted assets ratio. 

Manimekhalai is open to acquiring a bank and feels Union Bank has space to grow from its current market share of 9.6% of the total banking sector.  Her pet word as a mission statement for the year is ‘RACE’ - grow RAM loans, improve Asset quality, increase CASA (current account savings account) deposits and raise Earnings.

On transmission of interest rates to customers after the RBI hiked the repo rate, Manimekhalai said it will take time. “We are unable to transmit the higher rates to our existing customers so quickly. It will take a little bit of time and a lot of effort, particularly with our corporate clients who are reluctant to take that kind of price hikes. Ultimately, we will have to transmit it to them. In the next quarter onwards, the higher interest rates will be more widespread.”

To  fuel all this growth, increasing the quantum of low-cost deposits is a must. CASA (current account savings account) amounts to just 35% of the bank’s total deposits. “We are focusing on retail  business as it will bring in CASA deposits. We are targeting to push it up to 37% from the current 35%. For this, we will have to strengthen our connect with the people,” says Manimekhalai, who also draws during her spare time and is extremely fond of Tanjore paintings, murals and landscapes.

The bank has strengthened its workforce, recently recruiting 600 youngsters across various levels. “When I meet them the question that often comes up is how to maintain a work-life balance. I tell them this is an oxymoron; there is no work-life balance. When you come to office, you work in all honesty with the goals clear in your head. When you go home, another part of your life begins. Don’t carry work home. That is life,” she sums up. 

It is with this simple life recipe that Manimekhalai, whose name translates as girdle of gems, hopes to steer the state-owned bank through Covid, consumer stress, slowing economy, sluggish demand for corporate credit, higher interest rates, rising inflation and an unending war in Ukraine.