State-owned lender UCO Bank is implementing a strategic shift in its growth plan, concentrating on the pursuit of a "profitable" corporate loan portfolio expansion while identifying retail, MSME, and agriculture as its key drivers of growth in the coming quarters.
This shift in perspective concerning the bank's corporate loan portfolio coincides with the delayed rate cut expectations, attributed to global inflation and geopolitical uncertainties.
Furthermore, the bank has adopted a less aggressive approach to term deposits, choosing to prioritise CASA accounts to manage its cost of funds.
It intends to utilise its surplus Statutory Liquidity Ratio (SLR) deposits to fuel its growth initiatives, according to a senior bank official. The bank presently holds an excess SLR of Rs 23,400 crore.
"We are not chasing corporate loan growth merely for the sake of expansion. Our focus is on sustainable and profitable growth," UCO Bank MD and CEO Ashwani Kumar said.
Addressing a post-results briefing here on Friday, Kumar said the bank has identified retail, agriculture, and MSME segments as robust drivers of growth, all of which have been delivering favourable results.
However, Kumar clarified that the pursuit of profitable corporate lending does not imply a reluctance to engage in fresh lending activities.
He said about Rs 17,000 crore in loans were sanctioned during the second quarter, and Rs 8,000 crore disbursed.
In terms of advances, UCO Bank reported a 17.61% year-on-year increase in its Retail, Agriculture & MSME (RAM) segment, reaching Rs 90,046 crore.
Retail advances grew 17% to Rs 36,362 crore, agriculture advances increased 14% to Rs 22,985 crore, and MSME advances were up 20.83% to Rs 30,699 crore.
The share of RAM segment lending sequentially expanded to 63.15% of the total during the second quarter of the current fiscal, up from 61.48% in the year-ago period.
In contrast, the corporate book revenue for the same period was Rs 1,738 crore, down from Rs 2,088 crore in the preceding quarter.
The domestic corporate advance book witnessed a 1.79% contraction, totaling Rs 52,907 crore in the quarter under review.
Kumar emphasised on the bank's commitment to striking a balance by either renewing government securities upon maturity when bond yields are higher or utilising matured funds to facilitate credit expansion.
The bank's Credit-Deposit (CD) ratio is 67.25%, lower than the industry average of 76%.
Until the CD ratio matches the industry average, the net interest margin should be between 2.93 and 3.0%, Kumar said.
Regarding joining the Central Bank Digital Currency (CBDC), Kumar said the bank recently received regulatory approval and is currently in discussions with the National Payments Corporation of India (NPCI) to progress further.
Kumar clarified that the bank's plan to raise up to Rs 2,000 crore in equity will not occur in the December quarter and may be considered at a later date.
Due to higher operating expenses, the bank reported a 20% year-on-year decline in net profit, reaching Rs 402 crore for the September quarter.
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