Slippage of Rs 6,000 crore was recorded in September quarter: SL Jain, BoB

Shanti Lal Jain, Executive Director, Bank of Baroda, talks about the pressure on the bank, slippages that occurred in the September quarter and bank's NIM among others during a chat with Anurag Shah, Zee Business. Edited Excerpts: 

Q: More slippages were seen in the September quarter and more provisioning was required. So, do you think there is pressure on the bank?

A: Bank of Baroda's operating profit has gone up by almost 23%. If you look into the operating profit then you will find that our spread has increased by 10% because our cost of the deposit has gone down by 8bps and this dip in the cost of the deposit has risen our saving deposits. The bulk deposit has been established at our end. Similarly, our yield on advance has gone up and it has also contributed to the spread. Even our NIM has gone up from 2.6% to 2.8% while domestic NIM stands at 2.95%. When it comes to operating performance then our average has gone up in credit while we have gained a lot in the treasury. And, our recovery in return has gone up from Rs203 crore to Rs465 crore and there is a rise in Forex income. 

Apart from this, on the cost side, it has been put under control but ongoing deep into it you will find that the provision of salary has been raised and there is depreciation because of accounting practices in the remaining two banks. When it comes to net profit, then the Bank of Baroda's standalone profit of Rs425 crore and amalgamated entity of Rs149 crore has risen to Rs737 crore. Thus, our operating profit has gone up by around Rs1,000 crore.

Q: Update us about the slippages in September quarter which led to an increase in provisioning. So, is there more accounts beyond the NBFC accounts that have alerted you?

A: Certain NBFCs have been provisioned. There has been a slippage of about Rs6,000 crore of which slippages of around Rs3,000 crore is available in our corporate book. On looking into this slippage, you will find two NBFC accounts and one account each from plastic, textile and travel segment and this led to an increase in the slippages. However, our slippages in agriculture and retail have gone down while MSME slippage stands at the same level. On taking out these four accounts, you will find that there is a decline in our slippage.

Q: The September quarter results suggest that there is an improvement in Gross NPA and Net NPA. Name the accounts where recovery has been seen?

A: The recovery of Rs2,200 crore of June quarter has been raised to Rs3,700 crore in the September quarter. Similarly, the write-off recovery of Rs203 crore has gone up to around Rs465 crore. Thus, the total recovery of the quarter stands around Rs3,700-4,200 crore. But, the recovery has been made from small accounts. We have created a team of 2,700 people and who are looking forward to each account. We are selling them through SARFAESI, under which 1,000-1,500 accounts are being placed for sale every month. We are compromising on it and selling assets. We are also working on Lakshya, a scheme. Thus, we are working in all possible ways and in the process, we have called small accounts and made recovery from them and the momentum will continue further. Besides, recovery through IBC will be a good one as we have to recover from Bhushan, where we have 100% provision; Alok and Ruchi Soya among others.

Q: Thus you are confident that huge recoveries will be made in the first half of the FY2020-21?

A: If the recovery is made through IBC then it will be a good one otherwise we will continue with the momentum.

Q: Do you think that BoB's NIM will remain above 3% amid the control that you have on the cost of funds?

A: Our NIM will stay around the same as we are focusing on saving the deposit and current account. At the same time, you would have seen the re-pricing of the bulk-deposit of Vijaya Bank and that's why we are realigning our interest rate every month. This is something that is reducing our cost and increasing the spread.

Q: Update us about the credit demand during the festive season and before that and can you see any green shoots soon?

A: We went for a customer outreach programme and sanctions have been a good one in both retail and MSME. Similarly, the annual Kisan Pakhwada Baroda was held between October 1-16, 2019 and under it, we held Chaupals across the country during which we meet with the farmers and have discussions on recovery and further lending. We have grown amply in October as well and going forward our retail growth will be a positive one at least when the monsoon has been a good one and festive season is on. When it comes to corporate book then it has increased by around Rs4000 crore in the last quarter and there have been certain write-offs. So, it stands around Rs6000-7000 crore. Besides, there have been certain recoveries from NBFCs and going forward our corporate book will be better in the future.  

Q: At a time when you are talking about the retail growth then let us know about the demand scenario in auto and real estate sector at a time, when they have been in a bad shape for a long time?

A: There is a 34% growth in auto loan, which is a good one. Similarly, retail has grown by 16% and education and housing loans have also been a good one and we expect that it will get better in times to come.

Q: How linking of external benchmarking has an impact on the bank?

A: Things take time, presently, our external benchmark book stands at around Rs3,000-4,000 crore and its impact will be felt with time. Its impact and cost containing efforts at our end will have an impact on our margins.

Q: Update us on the capital that has been raised through asset monetisation? And, have you sold something in the areas where investments were made?

A: Certain assets have been put on sale and have sold an asset in Bangalore for around Rs30-32 crore and few more big assets will be sold in this quarter and they have been placed on sale. We have also identified a few assets that will be placed on sale. So, it is an ongoing process for us because post amalgamation we are thinking about whether we need such property or not and then placing them on a sale to monetize from it. Similarly, we are also trying to monetize on our investments and will get something from there too.

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Q: Do you have plans to reduce your stakes in the insurance company India First, as Bank of Baroda owns 44% stakes in the company?

A: We don't have any intention to reduce our stakes in the insurance company neither have any such proposal at our end.

Q: Name the pockets where the bank will be the focus of expansion? By when the IT infrastructure of the amalgamated banks will turn up to be a single one? 

A: Two things are essential when it comes to amalgamation and they are HR integration and technology integration. And, HR integration has been completed successfully and have been given best of the three and they are organization structure, placement and posting in Zonal and regional offices. When it comes to the business side or IT side then all corporate and common accounts have been shifted into BoB, in fact, accounts of around Rs70,000 crore has been shifted from Dena Bank and Vijaya Bank. Dena Bank and Vijaya had a credit book of around Rs2 lakh crore or which around Rs70,000 crore has been shifted and going forward the NPAs will be shifted or collocated. On the retail front, every branch has been mapped with our SMS and LLPS has gone live in 650-700 branches. The system driven work has been completed even on the agriculture front. On the liability side, the Bank of Baroda's offices has been aligned. Currently, we are looking forward to aligning the payment system because mobile banking, internet banking, PoS, debit and credit card have different vendors and we are trying to make them the single one. And, we hope that around 300 branches will be integrated by the January to March quarter and remaining will be integrated in the next six months.