City Union Bank is preparing for a commercial soft launch of its new retail products, including housing loans and micro-LAP (loan against property), in Q4 of the current fiscal year, with incremental growth expected from these new offerings in the next fiscal. The bank will focus on secured products under this portfolio, while also planning to revamp its core gold loan product by transitioning from floating to fixed interest rates.
After multiple quarters of negative operating profit growth, the bank reported strong year-on-year growth in the September quarter.
“We’ve seen significant improvements in credit sourcing efficiency, and our digital transformation has driven solid credit growth,” N Kamakodi, MD & CEO, CUB said during its Q2FY25 earnings call. He also stated that the current growth has been driven primarily by traditional business lines, including MSME and gold loans, while the incremental growth from retail is yet to begin.
He further explained that the bank is in the process of building its new retail vertical, with technology ready and senior management in place. “The commercial soft launch of the new products is expected in the last quarter of this fiscal year, starting with secured products. Significant contributions from these new products should begin by FY26,” Kamakodi said. The bank aims to attract new-to-bank (NTB) customers for its retail products. In southern India, branches and field staff will handle sourcing, while in northern and western regions, third-party channels and direct selling agents (DSAs) will be utilised. In-house sourcing will come with minimal costs, while third-party sourcing will involve some operational expenditure. “With around 550 branches in the South, we expect a strong retail business from internal sourcing without heavy reliance on third-party channels in that region,” Kamakodi added.
The bank is targeting a 2–3 per cent share of new products in FY26, with plans to increase that to 7–8 per cent in the following 2–3 years.
Kamakodi also highlighted healthy growth in gold loans but mentioned plans to scale up fixed-rate loans ahead of the expected rate-cut cycle. “Any incremental advance in gold loans is now at a fixed rate. About 25–30 per cent of our gold loan book has already been converted to fixed rates, and we aim to raise this to 50 per cent once the rate cut cycle begins,” he said. Regarding the strong growth in its NBFC lending portfolio, Kamakodi noted that between June 30 and September 30, the bank saw incremental growth of ₹315 crore in this segment. Year-on-year, the NBFC book grew by around ₹500 crore, despite repayments. “We’ve maintained a focus on yields, with the average yield on the NBFC portfolio close to 9-9.5 per cent, slightly below our overall average yield of 9.5 per cent, without compromising on yields to drive growth,” he stated.