City Union Bank eyes 15% loan growth for FY26 with new loan origination system, ET BFSI
City Union Bank (CUBK) goals to attain 15% year-on-year loan progress in FY26, supported by improved operational effectivity and threat administration following the profitable implementation of a brand new Loan Origination System (LOS), in response to ICICI Securities. The financial institution reiterated its progress steerage of 12–14% for FY25 and expects to speed up to fifteen–16% in FY26.
The brand new LOS, powered by Newgen, has digitised the complete credit processing workflow, considerably decreasing guide intervention and bettering lead high quality. Turnaround time has dropped from 18 days to only 2 days, with improved decision-making consistency and lowered drop-off charges. The LOS categorises proposals into ‘inexperienced’ (automated approval), ‘amber’ (guide intervention required), and ‘crimson’ (automated rejection). CUBK goals to extend the share of ‘inexperienced’ circumstances from 15–20% to 35–40% over the medium time period, enhancing effectivity and productiveness.
CUBK maintains plain vanilla treasury operations with no vital derivative-related dangers. The financial institution offers solely in ahead contracts, avoiding unique derivatives, and ensures all hedging is externally managed. FCNR deposits, amounting to round USD 60 million, are primarily USD-based with excessive liquidity. The financial institution has ceased utilizing arbitrage alternatives from INR-USD swaps after modifications in reported LCR, aligning its practices with business norms.
MSME lending to drive progress
The MSME section stays CUBK’s main progress driver, with 70% of the lending comprising working capital loans. The financial institution holds sole banker relationships in over 80% of its MSME accounts. CUBK expects MSME progress (excluding gold loans) to stay round 10% YoY, with potential to outpace business progress by 200 foundation factors. The financial institution plans to scale up its retail companies cautiously, including Rs 10–15 billion to the mortgage ebook by FY26.
Gold loans, which represent about 25% of CUBK’s portfolio, are anticipated to stay unaffected by latest regulatory modifications. The financial institution has already complied with many of the new stipulations, refraining from top-ups and making certain end-use disclosure from prospects. The agri-gold mortgage ebook, valued at Rs 70 billion, maintains a conservative loan-to-value (LTV) ratio, with 70–75% of the loans beneath Rs 2.5–3 million.
CUBK has disbursed Rs 80 billion beneath the brand new LOS, with minimal stress within the portfolio—SMA2 and NPAs stand under 0.4%. The improved threat monitoring and staggered sanctioning course of, aligned with ticket dimension and complexity, have additional strengthened the financial institution’s underwriting high quality.
