The Hindu Business Line : `Firmer rates won't hit credit disbursements'

MUSEUM IN MUMBAI: Mr K. Cherian Varghese (left), CMD, Union Bank of India, and Mr K. R. Hegde, ED, at a press conference in Mumbai on Wednesday. - Paul Noronha

Mumbai , March 29

Interest rates are going up globally, but this will not have a restraining effect on credit disbursements, said Mr Cherian Varghese, Chairman and Managing Director, Union Bank of India.

The huge growth in credit demand is because of the increase in capacity expansion by Indian corporates and the demand is from across the board. "There is still heavy demand on the banking system for additional funds as a substantial portion of the credit given by banks comprises term loans," he said. He was speaking to reporters at the inauguration of the Union Bank Museum at its M S Marg branch, in Mumbai. The museum has memorabilia dating back to 1920. The branch was inaugurated by Mahatma Gandhi in 1921. "As of now liquidity is comfortable, but going forward we need the comfort that we can meet the disbursements after meeting the cash reserve ratio and statutory liquidity ratio requirements," Mr Varghese said. Banks also have no comfort of excess SLR, he added. "For the last two years we have had more than 100 per cent incremental credit deposit ratio, which was met by reducing the investment portfolio," he said.

About the RBI increasing the ceiling on FCNR (B) deposits, Mr Varghese said it would have a longer-term impact and make bank deposit rates more attractive. In the case of Union Bank, NRI deposits are around 8 per cent of the total deposit base.

The bank has got RBI approval for full branches in Hong Kong and Doha and offices in Shanghai and Dubai.

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