Chennai: The Union Bank of India is targetting a total business of Rs 1,60,000 crore business (deposits = Rs 90,000 crore; advances = Rs 70,000 crore) during FY 2007. Last fiscal the bank did a total business of around Rs 125,000 crore (deposits = Rs 74,200 crore; advances = Rs 54,500 crore) placing it as the seventh-largest bank in the country and the sixth among public sector banks.

For the current year the thrust will be on the retail, agriculture small and medium enterprises (SME), and corporate sectors. The average interest yield from the four sectors are: retail and agriculture 8.75-9 per cent, SME 10-10.5 per cent, and corporate 8-8.5 per cent.

The bank's top brass were in the city for the past two days to discuss the annual business plan. According to chairman and managing director M V Nair, "The bank will be opening 100 more retail marts - a branch within a branch - to promote retail credit. The bank has 32 retail marts till date."

The bank has a retail portfolio of Rs 9,200 crore of which housing loans accounts for nearly 70 per cent. Selling third-party products like life and non-life insurance and mutual funds fetched the bank Rs 20 crore during FY 2006. "The target for the current year is Rs 50 crore," Nair said.

To increase its exposure to the SME segment the bank has identified 50 SME cluster centres. According to Nair, the bank's small and medium enterprises (SME) product, Union High Pride, is tailored to meet the needs of SMEs. The product offers credit limits from Rs 5 crore to Rs 25 crore. Last fiscal the bank lent Rs 6,834 crore to SMEs.

Strengthening its fund base with a public issue last year, Union Bank of India focused attention to tapping the competitive corporate segment. Expressing satisfaction with the bank's performance, Nair added, "We have gained substantial share in the power, port and other infrastructure sectors." According to him, 100 branches have been identified where specialised skilled person will act as the relationship banker for big corporates.

In order to promote banking practice among the villagers, Union Bank of India has started a unique concept called '100-per cent banking villages'. Through this, the bank tries to enroll at least one person per family as its client. "There are 133 such villages," Nair said.

The bank is also setting up Village Knowledge Centres. The centers, with an internet-enabled computer and agriculture related magazines provides information to farmers on weather conditions, prices of agri produce and inputs. The bank will be adding 100 more centres this year taking the total to 201 centres.

The bank's Union White Card, a product targeted at the dairy farmers has gained good acceptance in the rural areas. According to Nair, the bank has issued 34,000 cards involving a credit outlay of Rs 112 crore.

On the funds side, the bank's low cost deposit stands at 32.5 per cent of the total deposit base. The investment portfolio stands at Rs 25,600 crore earning an average yield of 7.82 per cent. "As the advances earned higher yield of 8.7 per cent we pulled out money from investments and lent it."

For the FY 2006 the bank's net non-performing assets stood at 1.5 per cent.

Costly banking solution
Meanwhile the bank's core banking solution is turning out to be a costly banking solution. According to Nair, the bank is upgrading its server so that more bank branches could be connected to the core banking software. Currently 779 branches and extension counters out of total 2,082 branches are under the core banking solution. "The target this year is to add 1,200 branches to be brought under the core banking software," said Nair.

One of the earliest banks to opt for a core banking software, Union Bank of India has invested around Rs 110 crore in its information technology (IT) initiatives - core banking solution, ATMs.

However the bank hasn't worked out the cost per transaction, one of the major criteria in evaluating a core banking solution. "Now we are looking into that and it is one of the important consideration in our negotiations with the software vendor," added Nair. It should be noted the cost per transaction in the case of Corporation Bank is just 8 paise as its core banking solution is not bandwidth and hardware intensive.

According to Nair, an additional Rs 170 crore is being planned this year for the technology initiatives. "The technology initiatives have enabled us to launch new products. Recently we have signed an agreement with Indian Airlines to offer online booking of tickets."

During the current fiscal the bank will be increasing the number of ATMs to 1,000 this year from the current 483 units. In addition the bank will be increasing its distribution network by 100 branches this year. It has received the Reserve Bank of India's (RBI) approval to open branches at Hong Kong and Doha in Qatar.