HomeFinanceCity Union Bank to start pushing non-gold loan advances by FY22-end

City Union Bank to start pushing non-gold loan advances by FY22-end

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South India-based private sector lender City Union Bank (CUB) has said it will start pushing growth in non-gold loan advances by the end of the current financial year. During the last few quarters, due to the Covid pandemic and in the absence of other avenues for growth, the bank had given thrust to improve gold loans, which were increased by 73% from Rs 4,537 crore in Q2 FY21 to Rs 7,849 crore in Q2 FY 22.

N Kamakodi, MD & CEO of CUB, recently said during an analysts’ call that when the growth of other credit increases, correspondingly the growth of gold loan would also decrease.

“We have not pushed our growth pedal in non-gold loan credit. We should be probably starting that from the end of the financial year if everything goes well. When the growth of other credit increases, correspondingly the growth of gold loan will also decrease, this is how we have managed growth in the past,” he said.

Currently, all the rural and semi-urban branches of the bank have gold loan as a product. As regards to metro branches, may be only 10% of the branches will have gold loan products. Out of a total 700, 350 to 400 branches may have gold loan products, he said.

On the recovery front, Kamakodi said in the first half of FY22, the bank had recorded a total recovery of Rs 290 crore comprising about Rs 210 crore from live accounts and about Rs 80 crore from technically written-off accounts, compared to Rs 108 crore comprising Rs 72 crore of live account and Rs 36 crore from technically written-off accounts in H1 of FY21.

In Q2 of FY22, it recorded a total recovery of Rs 189 crore comprising Rs 128 crore from live accounts and Rs 61 crore from the technically written off accounts.
“The current quarter recovery is the highest in the recent years, but still has to improve from here. The recovery will determine the ROA over the next couple of years, so we are taking all our steps under our command to improve this going forward,” he said.

The total provisions made during Q2 of FY22 and H1 of FY22 was at Rs 223 crore and Rs 433 crore against Rs 227 crore and Rs 429 crore in Q2 of FY21 and H1 of FY21 respectively.

He said that post Covid, only 4% to 5% of the transactions has been happening through the branches creating a huge capacity once the growth pace picks up.
On the network expansion plans, he said the bank every year used to keep plans for about 50 branches. “We opened only 3 branches or so in the financial year 2021 and this year probably we may open about 25 branches. That is what we are planning if everything goes well and we may initiate around 75 branches getting opened in the next year,” he said.

Kamakodi said the bank will also be looking at the co-lending space, underlining that it will do it on its own our terms by identifying a proper partner, going through small portfolio, testing the behaviour through cycles before expanding it and taking it as one of the main avenues of growth.

“What I can definitely say is that for the next three years, we would have definitely started co-lending, but it will not be a very significant proportion of our overall book even three years down the line. Once we get the total comfort and grip over how that segment is performing and what amount of control we have on that portfolio, we will take further call on that,” he said.

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