‘PSBs have shown consistent improvement in recent times’

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do you see the PSBs meeting their massive resource requirements for their future growth?

Though the prescribed regulatory capital requirement for banks in India is only 9%, PSBs have been maintaining their capital-to-risk weighted asset ratios of 12%. However, most banks expect capital to fall below 12% after migrating to Basel II.

While banks for whom there is sufficient headroom left in Tier 1 capital (through the equity route) will raise equity, the others would raise upper Tier I bonds up to 15% of their equity capital and another 100% of their Tier I capital can be raised through debt. For large banks like Bank of Baroda, it is not a serious issue as every year it can raise additional capital by ploughing back its large profits into Tier I as capital. However, in the long run, government’s ownership in PSBs could be diluted in a gradual manner by defining some roadmap.

What are your views on the proposed holding companies for banks and RBI’s draft paper on it?

In India, home-grown banking companies, which are on their way to becoming conglomerates need capital and I feel an intermediate holding company could be a good option.

Such company can be an NBFC or a pure investment company, under the full supervision and regulation of RBI. However, if it is not regulated by the RBI then it could develop potential risks. So banks need to discuss how to overcome the concerns expressed by the RBI.

How are you trying to make BoB a global bank? Are you looking for an overseas acquisition?

BoB has been a global or international bank of India for more than 50 years. Today, we have presence in 23 countries with 67 offices. In the financial year 2007-08, I had promised our stakeholders that I will open 10 new overseas offices and I am fulfilling that promise. I consider our international operations as our main comparative advantage as it contributes 20% to our total business, its cost-income ratio is half of our cost-income ratio in India and its net NPLs are zero. We are gradually concentrating more on local population in our overseas territories and loan syndication business there is fast replacing our trade finance business thus increasing our spreads.

You have laid enormous emphasis on HR during your tenure. What are the future areas of autonomy (including in HR) you want to see to make PSBs more powerful institutions?