Bank of Baroda managing director and CEO Ranjan Dhawan says the economy is yet to see a turnaround and it would be too soon to expect one before the year end. He said in the current fiscal, the bank will concentrate more on retail business. Excerpts:
With the overseas loan book growing 9%, would it be right to say the bank is focusing on foreign businesses to make up for a muted domestic credit demand?
The strategy is that we must grow the domestic book too. The problem with corporate loan book is that when you face a huge number of NPAs, banks get cautious. An ecosystem is created where the (predominant) thought is why should we give more credit when we are facing higher NPAs. We decided to be cautious.
Secondly, there is not much demand from the corporates, apart from the commercial real estate, and there is a limit to that too. A lot of foreign companies will come to India and new demand will be created. Going forward, there will be demand, however, it may not rise for the next two quarters.
As a commercial strategy, we have decided to target retail advances this year, which as a percentage of loan book is very low at 12%.
What is the bank’s outlook on NPA for FY16?
At this point of time, it would be difficult to give an outlook. There are big corporate houses facing difficult times.
There was already a debate on whether a major corporate should be classified as an NPA or not. Hopefully, it will not happen in the next 1-2 quarters. But if that happens, we will be hit by several hundred crore from a single company.
Which segment do you see retailers moving towards?
Home loans is our favorite as the delinquency in this segment is low and easy for us to enforce security and recover dues.
Do you believe the norms set by RBI to flag fraudulent accounts are a departure from the existing rules that banks follow?
These norms are not a departure from the existing system. They have mainly codified and made identification of such accounts more systematic. It will not make a major difference to us.
Can you explain how your staff expenses fell despite a wage hike?
The reason that staff expenses seems to have fallen is that it is only a quarterly entry. At the beginning of a year, we estimate our liability towards gratuity and pension. In the first three quarters, we pay according to that estimate and in the fourth quarter, we adjust the remaining amount. Accordingly, the amount was adjudged less by R200 crore, therefore, it appears to have fallen.