The state-run lender expects 30-35 per cent growth in its consumer loan portfolio during the current financial year. “Retail loans will continue to remain our focus area, at least for now. It is one of our key strengths. We feel there is lot of potential in the retail segment and we should exploit that opportunity,” Sanjay Arya, executive director of UBI, told Business Standard.
The Kolkata-based bank closed last financial year with total advances of Rs 67,982crore. Retail loans were at Rs 10,357 crore or around 15 per cent of the bank’s total advances. UBI’s retail loan products include housing loans, car loans,education loans and personal loans.
According to industry analysts, banks that have shifted focus to retail advances have been able to manage their credit risk better than their rivals in the current uncertain macroeconomic environment. “The retail segment has emerged as the strongest, despite growing concerns in the commercial vehicles segment,” Manish Karwa and Manish Shukla, analysts with Deutsche Bank, said in a recent note to their clients.
UBI, however, will continue to remain cautious in offering loans to large corporates and hence expect its overall credit growth to be in the range of 12-13 per cent during the current financial year.
RBI had earlier capped the bank’s loan-sanctioning power to Rs 10 crore following a rise in its bad assets and dip in the capital adequacy ratio. But following an improvement in the lender’s financial position the regulator has now relaxed the cap with some caveats.
“The cap was primarily because our capital adequacy ratio was low. But now that we have improved our financial position and (are) planning to raise fresh capital, we have been permitted to consider loan proposals up to Rs 200 crore. But we will continue to lend selectively and will be extremely careful while taking large exposures,” Arya said.
UBI has plans to raise up to Rs 1,000 crore either through a qualified institutional placement (QIP) or a rights issue. In addition, the bank aims to raise Rs 575 crore by issuing equity shares on a preferential basis to the government and the Life Insurance Corporation (LIC) of India. UBI closed the last financial year with a capital adequacy ratio of 9.81 per cent, according to Basel-III rules.