A STUDY ON INTEREST RATES IN UNION BANK OF INDIA

Abstract

Interest rates are one of the most powerful instruments of monetary policy and a primary determinant of a commercial bank's financial performance, lending behaviour, and deposit mobilization capacity. Union Bank of India, a major public sector bank formed through the amalgamation of Andhra Bank and Corporation Bank in 2020, offers a compelling case study for examining how interest rate dynamics shape banking outcomes in post-merger restructuring. This paper studies the interest rate structure—covering lending rates, deposit rates, MCLR, and repo-linked lending rates—at Union Bank of India over FY 2019–2024, and evaluates their impact on the bank's Net Interest Margin (NIM), credit growth, deposit mobilization, asset quality, and profitability. Primary data was collected through structured questionnaires administered to 30 respondents comprising bank employees, customers, and finance professionals. Secondary data was sourced from Union Bank's annual reports, RBI publications, and BSE financial disclosures. Analysis employs ratio analysis, trend analysis, and correlation methods. Findings reveal that Union Bank's shift from MCLR-based to repo-linked lending rates improved credit transmission efficiency and supported NIM recovery from 2.21% (FY20) to 3.14% (FY24). The study recommends further optimization of deposit rate strategy, acceleration of digital lending to reduce cost of funds, and proactive ALM practices to manage interest rate risk in a volatile monetary environment.