Public sector lender Bank of Baroda is targeting Rs 10,000 crore of recoveries and upgrades in the current financial year, MD & CEO Debadatta Chand tells Piyush Shukla. In his first interview after taking over as the bank’s MD, Chand says the bank aspires to lower gross and net NPA ratios to 2.5% and 0.5%, respectively. Excerpts:
Fresh slippages grew sequentially during Q4 to Rs 2,855 crore. Which sectors saw higher slippages?
There are higher slippages on agriculture and MSME side. These are seasonal trends. For instance, if you look at FY24, the total slippages stood at Rs 9,241 crore, higher than Rs 8,141 crore during FY23, but in FY24 a large aviation account also slipped. Therefore, excluding the one-off slippage, overall NPAs were lower in absolute terms during FY24.
What could be the slippage ratio and credit cost in FY25?
Our slippage ratio guidance is 1-1.25% and credit cost is less than 1%. While I can’t give a timeline, we aspire to lower gross non-performing asset ratio (GNPA) to 2.5% from 2.92% in Q4FY24 and moderate net NPA to 0.5% from 0.68% in Q4. If we achieve this ratio, it will be amongst the best in industry.
What is the quantum of recoveries and upgrades in pipeline?
The last financial year we had a target of `12,000 crore, we managed to do better than that and this year we are giving `10,000 crore of target.
NII has grown at a slow pace of 2% y-o-y during Q4FY24. What is the outlook?
Net interest income (NII) grew slower due to competition in the market on deposits and subsequent higher interest expenses. Now that cost of deposit is stable, and with better liquidity and moderating rate scenarios, I am getting much more rate sensitive liability to reprice at lower rate which will aid overall NII. So the guidance is, growth in NII would be higher than last year. At the same time, focus on fee income would continue.
What is guidance on advances growth for FY25?
Our guidance is to grow by 12-14% in FY25. Within this, retail will continue to grow at a higher pace of over 20%, corporate growth would be around 10-11%, and remaining MSME and agriculture will almost be at 15%, leading to overall advances growth of 12-14%. In FY24, our overall advances grew 12.5%, of which domestic advances rose 12.9% and global ones grew by 10.6%. Earlier international was growing much faster and that we have moderated because we are not going aggressive on international side. Considering current scenario of high completion on deposits, we want to fine-tune the balance between deposits and advances growth. Overall, we are aiming to grow retail loans share in overall book to 60% by FY25 end from 58% in FY24.
What’s your deposit growth outlook?
Deposits will be growing at 10-12%, in-line with the last year. Current account and savings account (CASA) have grown higher sequentially due to our focus on product offering, customer service, augmenting relationship manager skills and it is showing good results now. Gaining deposits has become somewhat challenging in the industry as funds are going to mutual funds and other alternate investment avenues, but we are looking to grow CASA by over 8% quarter-on-quarter in FY25.
What are the branch expansion plans for the fiscal?
Last year we said that we have a plan to open 650 branches in three years time, we could not open much branches last year, so in FY25 we are looking to add at least 100-125 branches. We are almost hiring 3,000 employees in current fiscal, and considering the current scenario, more IT resources are required now due to the emerging technology and to ensure safe cybersecurity standards.
Guidance on net interest margin?
We will be operating in the band of 3.15%, plus or minus five basis points (bps) and if you look at Q4FY24, global NIM grew 17 bps sequentially to 3.27%, as we rebalanced the asset and liability metrics. Cost of deposit is almost stable now. All my deposit of one-year tenure are repriced, so considering a stable interest rate regime, I don’t think cost of deposits will rise going forward.
What business gains do you expect due to RBI lifting ban on onboarding of customers on BoB world app?
We will now start onboarding customers again on the mobile application at a greater scale. Already there are multiple measures taken to strengthen the onboarding process. We are committed to complying with norms, and will choose a phased manner to onboard new customers on different channels.