BackUBI, Kotak look to tap current, savings accounts
UBI, Kotak look to tap current, savings accounts
PremiumMaking a point: Union Bank of India chairman M.V. Nair
Mumbai: With credit and savings account growth increasingly becoming the focus of attention for better profitability, a private sector bank as well as a large public sector bank launched products aimed at the salaried class and their employers on Monday.
While Kotak Mahindra Bank launched its product Salary 2 Wealth account to encourage salaried employees to save and invest along with regular spending, public sector Union Bank of India (UBI) unveiled its Union Super Salary Account (USSA).
K.V.S. Manian, group head for retail liabilities and branch banking for Kotak Mahindra Bank, said, “Corporate salary account comprises of 20% of our savings account portfolio. We see it going up to 40% by next fiscal year."
Both banks also said they will venture into new business areas as well.
UBI, which is also looking for expansion outside India, plans to open branches in Abu Dhabi in December and in Hong Kong in January. In April, the lender opened its representative office in Shanghai. UBI chairman M.V. Nair declined to give details on how much the new salary account would contribute to the bank’s overall current and savings accounts (CASA) growth. However, Nair said the bank hopes to maintain a CASA of 40% of its overall portfolio by 2012.
UBI officials said it has already signed on 250 corporations for the salary account and hopes to achieve 25,000 accounts by the end of March.
Banks prefer to see a growth in CASA because they are low-cost compared with high-interest bearing term deposits. While current accounts demand no interest, a bank typically pays less than 3.5% on a savings account. A term deposit, or a long-term deposit, can cost the bank anything between 11% and 13% in interest payments.
“We need to convince customers about the superiority of our product and services, and get back their confidence once again," said UBI’s Nair, referring to the flow of such accounts from public sector banks to private ones.
At Kotak, the goal is to target corporate salary accounts. “We will pitch our product to big corporates...organizations that have multi-city operations or a huge employee base, can obviously opt for us along with their existing service providers," said V. Swaminathan, head of corporate relationship management and retail liabilities at Kotak Mahindra Bank.
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