Bank of Baroda MD & CEO Debadatta Chand is committed to raising technology spends to address cyber-security and emerging AI-related risks. Chand tells Kshipra Petkar & Christina Titus banks must adapt to lower margins while maintaining 1% return on assets.
What gives you the confidence to revise credit growth guidance upwards amid geopolitical tensions?
Both credit and deposit growth significantly exceeded our guidance last year. Last quarter’s deposit growth was encouraging, signalling money is coming back into the banking system. Also, we are comfortable operating at a loan-to-deposit ratio (LDR) of 83%.
As such, with a deposit growth of 12% and LDR of 83%, I think we can support a loan growth of almost 15%. On the geopolitical front, I do not expect the West Asia war to sustain for a long time. If that is so we should remain within our guided band of 12-14% loan growth and 10-12% deposit growth.
Do you think the near 39% CASA growth seen in Q4 is sustainable?
Both the deposit and capital markets need to coexist. The flow of funds between these two markets is often driven by risk-on and risk-off sentiments. Therefore, it all depends on the sentiment prevailing in the deposit market. But we, as a bank, are encouraged by the deposit growth in the March quarter.
Do you think earning a 3% margin is now a luxury? Your guidance is 2.95%.
Our CASA ratio has risen to 38.9%, a key strength that positions our absolute net interest margins favourably compared to the overall system For the March quarter, our NIM was 2.89% and we have provided guidance of 2.75-2.95%. The bank would be doing all it needs to protect the NIM, as it is one of the key priorities.
Our global book is operating at a margin of 1.25-1.5%. As India moves to becoming a mature market and achieves Viksit Bharat, I think we need to be prepared for operating at a lower margin. That said, a lower margin should not lead to a lower ROA, which has to be more than 1%. So you are right, margins of 3% may be a luxury.
While fiercely competing to protect margins today, we aim to optimise other income and customer revenue if margins get squeezed later, ensuring ROA exceeds 1%.
What is the pipeline for the corporate loan book?
We have a pipeline of roughly Rs 50,000 crore of which, Rs 25,000 crore is sanctioned but not yet disbursed and another Rs 25,000 crore of proposals are under process but not sanctioned yet. Corporate loan growth reached 11.2% in FY26 with 14% in non-PSU (core) corporates, 24% in mid-corporates, and just 8% in PSUs. While PSUs are highly-rated, they demand premium pricing, so we’re prioritising core and mid-corporate segments. Renewables, data centers, and R&D also offer significantly higher delta than other sectors.
Would you be increasing your tech expenditure considering the recent developments?
We are hiring big for the tech team. We have said we would be hiring more than 250 people to augment the tech capability. BarodaSun Technologies (BSTL) will be doing captive business with the bank, and they will be investing in emerging technology.
We are working on augmenting our capability to meet the challenging tech landscape, both in terms of cybersecurity and the ability to offer the best technology to customers. We have set aside a minimum of 10% of the operating profit for tech spend, and we need to hike that to 15%.