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Bank of Baroda CEO: For better-rated borrowers, it’s a very competitive market

What we see today is a slower economy and a slower industry growth rate. To that extent, it could certainly impact our growth rate.

Better-rated borrowers are able to access finance at very fine rates, Sanjiv Chadha, MD and CEO, Bank of Baroda, told Shritama Bose. The environment for recovery of loans is now much better than two years ago, he added. Edited excerpts:

Is it correct that you have pared your growth estimate for the year?

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When the guidance was given earlier, we were looking at a certain growth rate for broader economy and the banking industry. What we see today is a slower economy and a slower industry growth rate. To that extent, it could certainly impact our growth rate.

Having said that, if you see the three-quarter figure, it shows that it has been pretty much a flat kind of year. On the other hand, if you look at figures within that broader figure, there has been significant growth in certain segments. Retail loan growth has been 15% and in that, car loans have grown north of 40%. Unsecured personal loans have grown about 29%.Wherever there were opportunities, the bank has been able to grow. In certain areas, like corporate loans, for instance, the opportunities have been relatively limited.

It’s difficult to say where we would be by the end of the year, but what seems to certain is that the bank is fairly well-poised to grow in the coming year. Whatever happens, some of it may get reflected in the figures up to March and some after. If we take a longer timeframe, say, the next six to 12 months, there are some positive factors playing out which promise to work well for the bank.

What are these factors?

One, when the bank started its merger process, it decided to have its entire corporate book on one platform. Whatever opportunities are going to be there now, merger is not going to come in the way of growth. Secondly, a number of banks have decided to focus on retail and not really rely on corporate for growth. For BoB, it will focus on both segments equally. Therefore, when players in one market shrink, the opportunity for remaining players would expand. So over the coming 12 months, there should be many opportunities for the bank to grow, even if the overall economic growth takes some more time to rebound.

Finally, with NBFCs in the process of repositioning themselves, opportunities would open up for banks. One is to buy pooled assets. More importantly, there are opportunities to work with NBFCs constructively because over a period of time, they have demonstrated some capabilities which are very valuable.

Are interest rates at their absolute bottom right now?

For a large number of corporates, the interest rates today are very competitive. The challenge may be that the full impact of repo rate cuts are not being felt in the market and that is, to some extent, a function of some rigidities that are there in the financial system. We also have to consider what impact a cut may have on the savings bank rate or to our existing term depositors. Having said that, for the better-rated borrowers, it is a very, very competitive market.

Therefore, I don’t think there is at all a case that you can charge more from customers simply because the availability of finance is not there. For the best-rated clients, banks still have to struggle to get the business. Very often, for the best borrowers, if you ask them if they want to borrow in dollars, what they say is that if you take the rupee rates, they are far more competitive than dollar rates, if you take into account the hedging cost.

How well has the inter-creditor agreement framework worked for banks?

A lot of these things have first-order and second-order impacts. The first order, of course, is that if you have a case in NCLT, it gets resolved much quicker compared to what has been the experience in the past. It also has a salutary impact even on those cases which have not been referred to the NCLT because both the parties are cognisant that the possibility is always there. We are able to actually have a resolution even before the case can go to NCLT. So, we are in a far better position than where we were two years ago.

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Source: Financial Express