?Our focus is on liability side, but won?t compromise on quality of assets?

State-owned Bank Baroda has rapidly undergone a great deal transformation to improve its performance. MD Mallya, chairman & managing director of the bank, speaks to FE’s Sitanshu Swain & Kumud Das outlining broad contours of the bank’ strategies.

What kind of business growth the bank has recorded in the current year?

Though corporate credit growth has not been up to the mark, we still see 20% growth this year in this segment. We have grown by 26% in retail alone. We have been able to increase our market share to 3.6% in deposit and 3.8% in advances. Our top line business as in March, 2009, was at Rs 3,37,000 crore and is likely to go up to Rs 4,05,000 crore by this month end. Similarly, we believe it will touch Rs 5 lakh crore by March, 2011. The customer base of our bank is at 3.7 crore at present and 15 lakh more will be added to our fold by March, 2011.

How have you managed to control NPAs during the year?

NPAs have not posed a major problem this fiscal. We need to wait for another six months as the market is reviving fast. Our net NPA an Gross NPA, as on December, 2009, stood at 0.31% and 1.27%, respectively.

What would you do to protect your NIM?

Our whole focus is on liability side. Still, I am not compromising on the quality of assets. To protect our NIM, we have adopted multi-pronged strategy to achieve this target. First, we are improving CASA so as to reduce cost of funds. Secondly, we have focused on retail term deposit.

We also discourage bulk deposits. Fourthly, we have managed our fund properly. Finally, we have grown uniformly, so that we can maintain an average growth. Our NIM (domestic) was at 3.37% in the third quarter. We have witnessed significant improvement in our NIMs. Our bulk deposit should be in the range of 16-17% of our total deposits and our CASA currently stands at 36%.

How would you implement the base rate at your bank?

It is a welcome change. It is only the modalities of the new system. My bank’s sub-PLR exposure stands at 70%. So, I think unsecured short-term loans may move out of the system once base rate becomes effective.

What is your take on the interest rates movement?

We have seen interest rate hardening in the entire system. But, we would like to wait for the RBI policy before taking any action on it. Obviously, there lies a dynamic situation.

How do you see calculation of interest rate for savings accounts on daily basis ?

I don’t think customers? preferences are going to change. We are paying at 3% while the savings account rate is at 3.5%. We will have impact on our margins once the new system begins, still we will have to absorb it somewhere.

What are the new initiatives you have taken after you joined the bank?

Among many things, we have taken two important initiatives. Last year, we took up a project of business process reengineering (BPR). Having put the technology in place, it is the next step to ensure that you harness the technology pattern for business growth through improving the customer care services. The project is known as Project Navnirman. The second project is known as Baroda Next, which is being headed by an officer in the rank of a general manager. Basically, it is also a BPR project. This initiative, too, was taken up last year. Therefore, we started searching for a consultant who could help us in realising this goal. We appointed McKinsy and the project has already started.

A number of new initiatives have been proposed by the consultant, which could add value, comfort and convenience to the customers, even ensuring a proper etiquette from the bank?s staff. We have zeroed in on few important areas where we can substantially improve our efficiency. We want to change the entire concept of work-flow at branches. We would like to make all our branch outlets as marketing offices and push all the time consuming routine work to a centralised back office.

Will it cover both retail & corporate?

It could be primarily in retail. For corporate accounts, we have got a separate set up altogether. It should not be mixed up with retails. Initial response has been extremely good on both assets and liability sides. Account opening will not be done at the bank now. It will be now be concentrated as a regional back-office.

One such office has already started functioning at Baroda. It will increase both efficiency and productivity. Once these things get improved, the business growth of the bank will also happen and finally the profitability will increase as these all are related to one another. This all has become possible because of the information technology platform that we have deployed.

What are your plans on HR front?

We are providing an extensive training to our staff. We’re developing leadership skills at deputy general manager (DGM) and general manager (GM) level. Also, we have recruited 200 people from premier institutes like IIM and IITs for departments like treasury and credit. I think recruitment should be a constant process. This year, we are going to recruit 3,500 people including 2,000 officers. Moreover, we are going to tier-II town institutes too. A large number of people is joining us now. Last year, we had recruited 1,500-1,800 people.