Bank of Baroda’s Cost of Funds has declined 53 bps in Q2FY21 compared to Q1FY21: Sanjiv Chadha, MD & CEO

Sanjiv Chadha, Managing Director and CEO, Bank of Baroda, speaks about Q2FY21 numbers of the bank, corporate and retail loans of the bank, restructuring of accounts and NPAs among others, during an interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: The bank has posted decent numbers in the September quarter. The profit has increased from Rs 737 crore to Rs 1,680 crore. Let us know what led to this rise in the profit apart from provisioning?

A: There are three to four reasons that lead to an increase in profit, like our cost of funds has decreased considerably. Our cost of funds as compared to the June quarter has decreased 53 basis points (bps). It has declined because of a reduction in saving bank and term deposit rates, while our Current Account and Savings Account (CASA) ratio has increased by 12% year-on-year. Similarly, our retail term deposits have also increased by 9%. Often, it is seen that if you want to increase your deposits then you will have to pay higher interest rates - but the distribution network and branches of the Bank of Baroda is a very big asset for us - that’s why despite that our interest rates are little less, we were able to secure a good deposit growth position in the market. This is something that helped us in reducing our cost of funds by 53 basis points. 

Q: Update us on the corporate and retail loan ratio of the bank and which segment has performed well in the retail loan?

A: The ratio of corporate is about 50%, which is quite high. We want to reduce the size of corporate in the future and increase the retail and accordingly, we are making our growth plans. Given this, the growth in our retail loans as I said is about 16%, which is much higher than the market growth rate. Going forward, we will focus on retail growth due to certain reasons, like the proportion of housing loans is higher in the retail loan segment. Almost 70% of our retail loan is housing loan, which is fully secured. 

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Q: Can you please let us know the bank’s estimate on restructuring and how many accounts have fallen under the ambit of restructuring? 

A: As far as restructuring is concerned, then we have to identify the accounts by December 31. For that, first of all, the borrower will file an application for it and then we will have to see that if he is a corporate borrower then does its criteria confirms to the Kamath Committee report. if he is a retail borrower then we will have to study the impact COVID has on him, i.e. has his income declined? Then his loan will be restructured, accordingly. Today, we have very few applications that’s why it is very difficult to make any guess on the number of accounts that will be restructured. In the next eight weeks, we have to identify every loan for restructuring, that’s why when we will meet again in January then I will be able to speak about the size of restructuring. But I would like to say that as per the provisioning as well as the power of our balance sheet and improved margins, we have enough money that will help our balance sheet to bear the impact of restructuring. 

Q: Your NPA numbers have also come down. So, tell us the quantity of recovery you have seen and what are the targets of gross NPA?

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A: I feel, we should focus more on net NPA. Our NNPA has declined to 2.51%. If seen from the historical levels than it is at a reasonable level. Given the stress that we have at present, is quite less than what we had expected 4-6 months ago. I feel, there may be a slight increase in NPAs because it is certain that some part of the stress will convert into NPA. But, if we are supposed to do a prognosis of next one year or two, then in my view, going forward our NPAs should come down further.