Banking with trust

ARUN TIWARI, Chairman and Managing Director, Union Bank of India was recently in Australia and caught up with PAWAN LUTHRA to talk about the strength of the Indian economy, issues facing the global economy and future growth plans for Union Bank of India

What brings you to Australia?
We’re setting up an office in Sydney; we will be up and running in the next few
Why did it take so long for Union Bank to come to Australia? What do you hope for the business?
It didn’t take that long! We’ve had a representative office here for a few years now. To graduate from a rep office to a fully operational banking unit takes time. I think the time now is just right, given the growing relationship between India and Australia. We operate out of Hong Kong, Dubai, Beijing, Shanghai, Abu Dhabi and Antwerp. Going forward we will also be testing the waters in the African continent.
Our hope is that Union Bank of India becomes the first choice for the community in Australia, on all counts.

What makes overseas offices so exciting? Is there a growing trend of trade from India to Australia?
We’re always seeking opportunities in overseas markets, thanks to globalisation and the borderless trade it brings. We look particularly for centres where there are migrant populations, good government and trade relations, and ease of doing business. Today, it is less about politics and more about economics, and economics should make the politics.
It’s been three years since you assumed your position as CMD at Union Bank of India. Can you share with us some highlights and challenges?
I firmly believe in competition as it always brings the best out of an organisation. It also gets the best deals for the customers! It keeps us on our toes. You are able to test your abilities and strengths when you go through tough times. I say these are not tough times, these are exciting times for the banking industry, globally. Regulation, compliance, these are the challenges. Risk management capabilities, capital requirements, in times to come, these issues will be sorted.
For us in banking, as a critical part of the service industry, trust is sacrosanct. Whatever we do, it must be in a transparent manner. In the competitive market we have been operating out of for the past few years, the differentiating factor is what we call in the Union Bank of India the three pillars of BASEL: human capital of the organisation, digital capabilities, and risk management practices. The things that differentiate us, are the quality of our product, the ease of using our products, and how competitive we are in terms of our financial charges.
 You have recently said the bank will focus on retail, agriculture and MSMEs (Micro Small Medium Enterprises) but demand from the corporate sector has been low. Is there a change in direction from the bank’s point of view?
We didn’t quite expect that the economy would not be doing well for so long, it was a global phenomenon. Back in India, if we have 4096 brick and mortar branches across India and it is a country of 1.26 billion people, our forte should be retail, MSME and agriculture.
Let’s look at agriculture first. More than 60% of India’s population still lives in areas where the mainstay is agriculture. The share of agriculture in GDP is dwindling now, and the government wants to improve by a few notches.

On MSMEs, there’s much hope for Prime Minister Modi’s mission of Make In India. Globally, in the developed economies, the contribution of MSMEs has been the greatest in terms of GDP. It also contributes towards employment, so this is a sector which gives us lots of scope.
And with 1.26 billion people back in India, retail is another area where we have, as of today, about 800 million Indians under 35 who are aspirational, motivated, and gung-ho about their future so this is another area where we see the market growing.
Putting these together, we have what we call the RAM factor: Retail, Agriculture and MSMEs. In the past one year, the contribution of these three segments has gone up from 44% on the balance sheet to 52%. The quality is good, risk-weight is less, return is better, and we have a larger client base so there are more opportunities to cross sell and up sell.
Any movement forward in the corporate sector?
It has been slow for the past few years but in times to come, as the kind of efforts governments have put in over the past 18 months or so get the corporate sector back on track, I see some green shoots where demand from that sector is concerned. In the next two quarters or so I think there will be perceptible demand from the corporate sector.
You have said that ‘digital banking will replace branch banking’. Is the bank well positioned in that area?
I take absolute pride in the digital sector where our bank is concerned, we are ahead of the curve among our peers. As of today, 63% of our transactions are e-transactions, which is one of the highest rates back in India. We have top-of-the-line products and with some of them we have been the first on the block to deliver these customer-centric products. Let me give you the simplest example, a ‘selfie’ account. Following the trend of selfies today, we provide a facility where you take your photograph, a photograph of your documents, upload them and there you go. That’s quite unique. Union Bank has been working ahead of the curve and they have reaped the benefits of that.

Click banking will not replace brick banking, there will be a hybridisation. Even if you look at the United States, people are coming back to the branches. Back in India, with the education levels, there are still many people who are not very literate. We have a client base, being a government bank, in the remote areas of India, where a customer may come with A debit card, use it at the ATM, but they’ll still go inside to make a passbook entry. We have to take care of all stakeholders.
What do you feel is the state of the world economy?
It’s tough times across the globe. In the recent few months we have seen an uptake in the US economy, but otherwise, most of Europe or Japan, they’re reeling under tough times. Having said that, India still remains the sweetest spot.
What do you think is going to be the circuit breaker? What’s causing these tough times? Is it still a hangover from the GFC?
It will remain so for some more time. Again, we always look at the US as that driver or pull factor. Perhaps, with their economy on the uptake, it will turn around.
Maybe it will, but the US has recently increased its interest rates which could impact emerging economies. How will this effect India?
It’s a 25 basis point rate. It was being talked about for some time, the timing was the issue. Markets usually normalise much before with only a 25 basis point rate change. From an Indian economic point of view, it will not make an impact, none whatsoever.