State-owned Uco Bank expects its micro, small and medium enterprises (MSME) portfolio to remain stable despite global headwinds, managing director and chief executive officer Ashwani Kumar told Mint in an interview on Thursday. The bank is eyeing a retail lending boost and is stepping up investments in technology to drive growth, he said.
While geopolitical tensions and supply-chain disruptions could have some impact, Kumar expressed confidence that policy support would help cushion the sector. Uco Bank expects its MSME loan growth to remain around 20% in the current fiscal year. The share of MSME loans in the bank's total advances is nearly 20%.
The bank’s MSME loan book is at around ₹46,000 crore, with special mention account (SMA) exposure in large-ticket MSME loans of ₹1 crore and above accounting for just 1-1.5% of the portfolio. Slippages have remained contained at about ₹200-250 crore, broadly in line with past trends.
“Early warning indicators such as cheque bounces and EMI dishonours have not shown any unusual spike so far," he added, underscoring strengthening of customer outreach to stay ahead of any potential stress.
This comes against prolonged challenges for India’s MSME sector. The country has nearly 80 million such enterprises, employing over 328.2 million people and contributing over 31% to the GDP, 35% to manufacturing output and close to half the country's exports. Over the past five years, they have navigated repeated shocks—from the disruption caused by the pandemic to cost pressures in the wake of the Russia-Ukraine war, alongside recurring tensions in West Asia and trade disruptions under the Donald Trump administration in the US.
“MSMEs are part of the broader supply chain, so they cannot remain completely insulated. But as of now, we have not observed any disturbing trend,” Kumar said.
Last week, Uco Bank reported a 23% year-on-year growth in March quarter net profit to ₹801 crore, supported by lower provisions and better asset quality.
"Overall, we expect the growth momentum to continue, with credit growth guidance of 12–14% and deposit growth of 10–12%," he said.
Retail lending has emerged as a key growth driver, particularly vehicle loans that grew over 70% year-on-year. Kumar said the bank has revamped its products and processes to enable faster approvals, as customers increasingly expect same-day loan disbursements.
The public sector bank has rolled out multiple digital loan journeys, allowing approvals in 10-15 minutes; with around 50% of vehicle loan sanctions processed digitally, significantly reducing turnaround time. Despite the strong growth, the vehicle loan portfolio remains modest at about ₹8,000 crore, indicating room for expansion. The bank is targeting around 50% growth in this segment in FY27.
“Housing loans are also seeing steady traction, with growth holding at 18–19%, driven by demand from tier-2 and tier-3 cities,” he said.
Fund raise plans
Uco Bank is preparing to tap capital markets, with board approval in place to raise up to ₹2,700 crore via a qualified institutional placement (QIP).
Kumar said the bank is confident of investor interest but will time the issue based on market conditions.
The bank may also consider combining the fundraising with a government stake sale through an offer for sale (OFS), he said. The government currently holds 90.95% stake in the bank.
Cybersecurity and new tech
To check the rising threat from digital frauds, the bank has set up a 24x7 cybersecurity operations centre and deployed advanced monitoring tools to detect and respond to threats in real time. It has strengthened transaction monitoring systems to track both debit and credit patterns, enabling flagging of unusual flows and blocking suspicious accounts immediately, said Kumar.
“AI (artificial intelligence) is probably the only way to counter AI-led threats,” Kumar said, adding that the bank is integrating the technology into its security architecture. It is also focusing on faster patch management and robust disaster recovery systems to ensure business continuity.
Uco Bank is significantly ramping up its technology and cybersecurity capabilities. Its information technology (IT) spending has risen steadily from ₹577 crore in FY24 to ₹643 crore in FY25 and ₹899 crore in FY26, with plans to increase it to ₹1,200–1,300 crore this fiscal year.
On the digital currency front, Kumar said, the bank has onboarded over 1 lakh customers for its retail central bank digital currency (CBDC) pilot, and is currently seeing around 2,000–3,000 daily transactions. Volumes are expected to rise further following the launch of its iOS application after the National Payments Corporation of India's nod.
The bank is also exploring programmable CBDC use cases that could enable participation in government schemes and targeted benefit transfers, he said.