After attaining a credit-deposit ratio of about 75%, UCO Bank has started working on boosting deposits, says managing director and chief executive officer Ashwani Kumar. In an interview with Sachin Kumar, Kumar says higher recoveries and controlled slippages led to a significant improvement in the asset quality, which the lender expects to maintain in FY26. Excerpts:
How is credit growth likely to shape up for UCO Bank amid global uncertainties?
In FY25, our credit growth stood at 17.72%, compared with 15.62% the year before. In both the years, our internal guidance was 12–14% and we managed to surpass that. For the current year as well, we are maintaining the same guidance range of 12–14%. There are two main reasons behind that. First, 62% of our credit portfolio is towards RAM (retail, agriculture, MSME) and corporates accounts for the rest. RAM is primarily driven by domestic economic activity and despite global headwinds — tariffs and geopolitical tensions — the Indian economy remains strong.
Second, there is continued policy support from both the government and the Reserve Bank of India. The government has introduced various incentive schemes, and the RBI has cut the repo rate and taken steps to inject liquidity into the system. All these factors, including tax reliefs and expectations of a normal monsoon, are supporting a strong retail credit demand. So, we do not see any major challenge on the retail side and remain confident in achieving our growth targets.
How is corporate credit demand growing?
Corporate credit demand remains steady. Last year, our corporate book grew around 12%. Sectors like renewable energy, steel, cement, and hospitality are showing consistent demand. We currently have a sanctioned pipeline of about Rs 10,000 crore, which we expect to disburse over three to six months. Our yield on advances has improved, and net interest margin has risen from 2.92% last year to 3.08%.
What is the trend you expect for the asset quality?
We’ve made significant strides in improving the asset quality. Our gross NPA (non-performing assets) has come down from 3.46% last year to 2.69% currently — achieving our guidance of keeping it below 3%. Net NPA has improved from 0.89% to 0.50%, also beating our target of below 0.65%. Importantly, this reduction hasn’t come in one quarter — it has been a consistent, sequential decline.
The improvement has been driven by both higher recoveries and controlled slippages. As long as we keep fresh slippages in check and recoveries continue to outpace them, we expect this downward trend in NPAs to continue through the year.
What is your recovery target from bad loans?
Last year, we set a recovery target of Rs 3,000 crore and ended up achieving Rs 4,400 crore. Some of the accounts we expected to resolve this year were resolved in the last quarter of FY25 itself, adding about Rs 800 crore in recovery. As a result, we’ve toned down this year’s target to Rs 2,500–2,700 crore as Rs 800 crore has already been accounted for. But overall, we remain focused on maintaining a strong recovery momentum.
How do you see deposit growth shaping up this fiscal?
Deposit growth is picking up. In FY24, it was 5.5%, and stood at 11.56% in FY25. Our earlier guidance was 8–10%, but we have revised that to 10–12% now. Initially, our focus was more on credit growth rather than deposit mobilisation because we had a low credit-deposit (CD) ratio and wanted to utilise internal resources like excess SLR securities and refinance facilities. This was especially important since bulk deposits were expensive due to a tight liquidity environment.
Now that we have reached a CD ratio of about 75%, we have started actively working on boosting deposits. We have also revamped our mobile banking app to enhance customer engagement. With improved liquidity in the system, deposit growth should remain healthy. We expect 10-12% growth in deposits in FY26.
What is the outlook for CASA ratio this year?
While the industry has seen a general decline in CASA (current account savings account) ratios over the past two years, we have managed to hold steady. Our CASA ratio has remained in the 37–38% range, and this is our internal target for this year as well.
Are you planning to reduce FD or savings interest rates?
Interest-rate decisions are taken based on market conditions and the bank’s asset-liability position. Our asset-liability committee meets monthly to review deposit and loan maturities, liquidity coverage and funding needs. If we see a significant shift in demand-supply dynamics, we will accordingly re-evaluate deposit and savings rates.