• Fixed deposit programme Rating : FAAA (reaffirmed)
• Certificates of deposit programme Rating : P1+ (reaffirmed)

The rating factors the government ownership, size, moderate capitalisation and the strong resources position arising out of the geographically well diversified branch network. Partially offsetting these are the bank’s moderate profitability and asset quality and the inherent interest rate risk on the government securities portfolio, a risk also prevalent in most other public sector banks. The management is addressing these issues by focussing on asset liability management, enhancing credit growth and increasing profitability with concrete action plans.

Union Bank is currently 100% owned by the Government of India. The bank has a strong resources position with a total deposit base of around Rs 281 billion as at March 31, 1999, which ranks it seventh in terms of size of deposit base, among all banks. UBI’s deposit base, shows good regional diversity due to its large and widely dispersed branch network throughout the country. This strength has contributed to a healthy deposit accretion with competitive deposit costs. In recent times, there has been an increasing level of competition for retail funds primarily at the metro and urban centres with aggressive funds mobilisation by financial institutions, new private sector banks and mutual funds. Although, the bank is expected to maintain its strong position on account of its reach, the bank could face pressures on deposit pricing to protect its market share especially in urban and metro regions.