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We will come out with policies to support viable MSME units: Rajkiran Rai G

The MD & CEO, Union Bank of India, says the merger is not going to disturb any of the customers.

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Last Updated: Apr 06, 2020, 02.12 PM IST
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Rajkiran Rai-Union Bank-1200
None of the banks have really cut down rates on working capital and also on the term loans even after the rate cut. Should we expect something very soon once the transmission and the effectiveness goes through?
Our MCLRs were cut by about 25 bps from April 1, but for companies at the time of review renewal, this will be effective.So there may not still be any immediate impact but for MSMEs and retail, external benchmark link rates are cut by 75 bps immediately and so they will be benefited immediately. But larger companies have to wait for the renewal and review date for the MCLR cut to be passed on.

What is currently happening to the banking system? I appreciate the fact that banks have made sure the economy is running, the ATMs are functioning and the back-end is still working. But what is the real story? How much bank transactions have dropped? What is happening to fresh disposals? What is happening to unsecured loans is everything at a standstill?
Actually at branch levels, small loans have gone down a lot and branch transactions have come down by about 70-80% because of the lockdown. But ATMs are working fully. About 90-91% of the ATMs are up and running. We are extensively using the business correspondents who are at the village levels for payments.

The direct benefit transfer to the remaining beneficiaries of the PM fund is happening. The numbers ending with 0 and 1 are getting the credit and all the banks are geared up to make these payments. We are coping but at this point of time, keeping our staff safe, our customer safe and keeping the basic services running is more important. We are doing that but then on the large and big corporate side, they are being handled centrally.

Even in the last week of March, we were doing a lot of disbursements. That did not stop. Even our bank has come out with a policy to give 10% of the additional leeway with a moratorium of six months. We have received a lot of applications and by the first week of April, we will be clearing many of those proposals.

The RBI Governor referred to the fact that stock prices are forcing a lot of large investors to liquidate the term deposits from some of the banks. What has been your experience? Is it true that bulk of the deposits from small banks are getting liquidated and they are moving to only two or three large private banks or large PSU banks?
We observed this trend in the third and fourth week of March to some extent but that is over. There were some liquidity issues in some of the private banks which hopefully are behind us. I do not foresee any problem going forward because these are reactions to a particular incident. Some of the state governments and some of the departments moved their deposits out and that is over now. I do not feel this is a problem as we go forward.

What will be your policy on the moratorium? Would you be charging interest on the longer tenure loans because this will take the cost up quite substantially and is likely to create a larger NPA?
The interest charging will continue. The only thing is there will not be any demand raised on the customer to pay that. In case of EMIs, as already explained, the whole EMI along with the interest gets deferred if the customer wants it to. In other cases, it is already very clear in RBI instructions that for three months they need not pay the interest but then there is a lot of leeway given to banks by way of reassessing the working capital needs.

So within these three months, we need to rework the working capital asset spent and give them additional limits to take care of this extra burden. We had to work out all those things and because most of the manufacturing or service industries have stopped functioning, maybe we have to relook at their cash flows, their receivable levels and rework their requirements as they open up for business.

There is a lot of work in every sector that banks have to do with the support of the RBI and the government. We may have to come out with some relief measures for the people to restart their businesses. At this point of time, it is difficult to assess how it will pan out once the immediate problem of the virus infection is over.

When we are looking at overall difficulties in the economy that are bound to impact the banking sector as a whole. From a merger perspective, can you tell us what customers really need to keep an eye out for and what they need to watch for?
Customers need not worry about anything. They will be better off with the system which Union Bank has. For the small customers, we have kept that interface unchanged so that they find the same branch, same staff, same manager. Customers can deal with them. Directions have been given to every branch. We have trained them well. There will not be any issues for small customers, We are directly communicating with large customers and we will take care of all their issues. The merger is not going to disturb any of the customers. We will fully take care of their needs.

Could there be a challenge in terms of the NPA cycle coming back? Also do you worry about MSE and SME companies because they do not have good margins and they are the ones who are going to witness a huge impact of cash?
Yes actually this sector was going through some stress earlier also. There were effects of the slowdown on them and now the Covid-19 crisis has added to their pain. We will definitely come out with the policies to support all the viable units. Viability is very important. There is no point giving relief to units which are already under stress and cannot stand on their feet. This is only postponing the problem like we need to work with the companies which are viable and we need to support them fully.

The policies are being worked out. We will come out with policies within the next one or two months as the moratorium period gets over. We will be back to business with all the support to viable MSMEs.

What about granting new loans if somebody has a requirement for a term loan after 10 days? Are you open for business?
Yes, yes we are open for business. We are adequately capitalised and there is no issue and we continue to give loans. In March also, we have done a good number of disbursements and in April, sanctions are lined up and the disbursements will continue. We are receiving applications and most of them are to get that additional 10% which is getting sanctioned. As we move forward, even the fresh applications will come in and we are very sure that Union Bank will support the right kinds of business.
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