After a career spanning 38 years in banking, Mr M. V. Nair, Chairman and Managing Director, Union Bank of India, will demit office this month-end. During his six years at the helm, Union Bank has seen qualitative changes such as customers getting the convenience of self-service banking and staff-assisted banking. The quantitative changes include tripling of the bank's balance-sheet size, and rapid expansion of branch and ATM networks.
In an interaction with Business Line , Mr Nair outlined the improvements that happened in the bank during his tenure. He was also candid about the build-up of stressed assets, their resolution, and the inability to take full advantage of loan automation software in the bank.
What are your thoughts when you look back on your career?
I am extremely satisfied with my career. Whichever way you look at it, there has been plenty of opportunity to contribute not only to the banks I was associated with (Corporation Bank, Dena Bank and Union Bank of India) but also to the industry — Indian Banks' Association, Institute for Development and Research in Banking Technology, Institute for Banking Personnel Selection, Indian Institute of Banking and Finance and National Payment Corporation of India Ltd.
I have also been part of some of high-profile committees such as the Khandelwal Committee on Human Resources, Damodaran Committee on Customer Service, Usha Thorat Committee on Lead Banks, and finally as head of the Committee on Priority Sector Lending. Contributing to these committees gave me great satisfaction. You need to get the opportunity to do all this.
What, according to you, is the difference between the Union Bank of 2006, when you took over as CMD, and now?
Our core theme in the last six years has been customer service. We have worked on technology, process change, skill building exercise at various levels and multi-channel delivery, all with the objective of getting the customer experience right.
The objective we have set for ourselves is to become the No. 1 retail bank in customer service excellence by 2012.
We said we should have one strong differentiator which will carry us forward for a long time. Hence we chose customer experience as the differentiator. It took time to put things in place, but now we have great satisfaction that we have done it.
In 2008, the customer was a customer of a particular branch. So, we implemented the core banking solution platform. In five months we moved all branches to this platform. From then on, the customer became a customer of the bank.
In April 2006, we had 2,080 branches. Now we have 3,300 branches. We had few ATMs then. Now we have 3,500. Our ATM-to-branch ratio is one of the highest in the industry. Our customers get response in nine languages from our 100-seater call centre. Over time we have been able to achieve the objective that we had set for ourselves.
We have started a customer-care unit in our M. S. Marg branch (Mumbai). A customer having a service request or a suggestion to make can choose whichever route he wants — email, send a letter, call up the call centre — but all the requests will be handled by this centre.
The centre runs on customised software, which has the capability to categorise the complaints, throw up suggestions for resolving them, get into root-cause analysis, and analyse customer suggestions.
This will also help us in designing new products and services. Our philosophy is that we provide all access channels to the customer, of which, the branch is one.
If you visit a UnionXperience branch, you can complete 90 per cent of your transactions at the self-service lobby. Sum and substance of our efforts is that the transformation process was primarily focused on customers.
We will be engaging an external agency to conduct an annual survey about customer satisfaction.
Today, 56 per cent of our transactions takes place on alternative channels. In 2008, it was 6 per cent. What this means is that you are attracting new generation customers, which was not the case in the past.
We are attracting Generation-Y customers when they are in the college through our ‘cashless campus' product. Our smartcard takes care of university fees, canteen payment. Now we are covering 10 universities.
How has the balance-sheet grown — quantitatively and qualitatively?
Balance-sheet growth has improved. We may end the year at Rs 3,90,000 crore of business, against Rs 1,28,000 crore in 2006. We have the potential to grow very fast because of the capabilities that have been developed.
In terms of profit numbers, in the first three years, beginning 2006, the return on assets (RoA) moved from 0.9 per cent to 1.25 per cent. The last two years have been a bit of a dampener because of the external environment.
We also migrated to the system-based recognition of NPAs (non-performing assets), which resulted in additional provisioning. Further, pension payment had to be made as per the agreement. So, there was some impact on profitability. But that part is over.
Going forward we may grow at least 5 per cent higher than the industry because of the capability that we have put in. RoA will move to 1.30 per cent from next year onwards because all the pain is over. NIM (net interest margin) is intact around 3.20 per cent.
Our NPAs will actually start falling from the fourth quarter onwards. While the general belief is that NPAs in the banking sector may go up, for Union Bank it will come down. And it will continue to fall. The reason is that we took all the accounts into the system-driven NPA recognition mode by September. In the December quarter, some accounts were leftover. But NPAs held onto the same level (Rs 5,200 crore) as the preceding quarter.
We have strengthened the whole recovery mechanism. This quarter, recoveries and up-gradations are actually happening. Follow up of bad loans is taking place closely. NPAs may come down by about Rs 250 crore this quarter, and will fall both in absolute and percentage terms.