PremiumBank of Baroda (BoB) is expecting growth its corporate loan book in the next few quarters, as govt spending picks up in roads and energy segments. However, retail loan growth will continue to be ahead of corporate loan growth, BoB managing director and CEO Sanjiv Chadha said
MUMBAI : Bank of Baroda (BoB) is expecting growth its corporate loan book in the next few quarters, as government spending picks up in roads and energy segments. However, retail loan growth will continue to be ahead of corporate loan growth, BoB managing director and chief executive officer Sanjiv Chadha said. Edited excerpts from an interview:
Bank of Baroda reported ₹5,129 crore of slippages in the first quarter, with higher contribution from micro, small and medium enterprises (MSMEs) and retail segments. Didn’t these borrowers choose the restructuring option?
MSMEs have been stressed for the better part of last year. The second covid wave was damaging. The cases which slipped into non-performing assets could not be covered by restructuring. In terms of Emergency Credit Line Guarantee Scheme (ECLGS), nearly 90% of loans have been disbursed. This is apart from that. Last time, there were a lot of people who were offered restructuring, but they did not take advantage of it. Under the second wave, moratorium option was not there. You are seeing a fair bit of pullback in July. While the MSME challenges are structured because of the prolonged impact of the second wave, the retail stress should dissipate in the next few quarters. It should be much more muted.
Are you seeing a pick-up in demand for corporate loans?
Some pick-up is happening in corporate loans. Road sector, renewable energy, city gas projects are seeing a pick-up in credit. Brownfield expansion is happening. There is demand, but it’s not back to pre-pandemic times. Compared to previous year, pick-up is happening.
What would be the retail/corporate mix that you are looking at?
Corporate segment saw an exaggerated decline because we decided to let low-yielding, high capital consuming loans to run off. We believe there should be opportunities for better-yielding loans in the coming months. We should be looking at rebalancing in such a way that the loan growth in retail is higher than corporate.
Both Vodafone Idea and the Future group seem to pose challenges for the banking sector. How do you see it affecting BoB?
Without getting into discussions about any specific corporate, I would say that when it comes to the telecom piece, our exposure is very limited and not something that has any significant bearing. In terms of the retail sector, there is so much interest in the company and it would suggest that something should work out, regardless of what that is. There is a restructuring which has been done on the retail account as well. To my mind, it would have been an issue if there was not much interest in the business. With the lockdowns being lifted, even on a standalone basis, the company would be able to deal with it.
Does the bank intend to raise capital this year?
Not really because our capital adequacy is at 15.4% and common equity Tier 1 (CET-1) ratio is at 11.25%, and we are thus comfortable in terms of capital. Also, what we see by way of loan growth, the bank should be able to fund it from internal accruals. At this time, I do not anticipate any capital raise during the year.
Has debt recast managed to alleviate stress?
The largest proportion of debt recast in the first round came from the corporate side, and that is something should be well going forward. For MSMEs, we hope there is a recovery in the next few months as the last one year has been pretty tough. As a whole, we do not expect this book to be a matter of too much concern. Restructuring would pretty much allow these companies navigate the difficult period.
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