BoB won’t require additional equity capital: PS Jayakumar

By: | Published: February 14, 2016 12:00 AM

Slippages on account of AQR come to around Rs 7,400 crore. So about half of the slippages this quarter are due to the AQR.

After taking a bold step to provide for all AQR-related accounts in one quarter—instead of spreading them across two quarters like most other banks, which led to Bank of Baroda reporting a net loss of Rs 3342.04 crore in Q3FY16—its MD and CEO PS Jayakumar spoke to FE about the benefits of starting with a clean slate and how his bank won’t be needing any capital infusion from the government. Excerpts:

How much of the slippages in Q3 was because of the AQR?

Slippages on account of AQR come to around Rs 7,400 crore. So about half of the slippages this quarter are due to the AQR. The important point here, however, is not what the absolute provisions are; the important point is that we are leaving the legacy behind and putting everything in place to grow our business. The important point to underscore is also that our capital adequacy ratio, despite the provisions, and our liquidity position are extremely strong. Hence, the other important message we have sent to our equity shareholders is not to worry about unlimited dilution. As of now, as far as we can see, Bank of Baroda won’t require additional equity capital.

What kind of slippages do you expect in the next quarter?

Now that we have provided for all AQR-related accounts, going forward, we expect only normal slippages that happen in our normal course of business, which is not going to be significant.

How much exposure do you have to the metals & mining and infrastructure sectors?

Our exposure is granular. I don’t think we have an exposure of more than R2,000 crore to any single company. This granularity of our exposure protects us well. We are also not the lead bank in too many transactions. So, there are no concentration risks. At the end of the day, we must also understand that the bulk of our exposure has real assets behind them, be it a power plant or a steel manufacturing facility. The exposure to pure trading activities is fairly limited and contained. Therefore, logically, recoveries should come in.

What kind of business are there behind these R15,000-odd crore of slippages this quarter? Will they continue as growing concerns, particularly given that in the past, when loans are written off, the recovery process of PSBs is very painful?

Firstly, the slippages are not loans that have been written off. Secondly, our approach to NPAs is that, if we find an account to be a viable unit, we’ll still support it by way of further funding, if required. As far as PSBs’ inability to recover or go for one-time settlements (OTS) is concerned, there is, today, a change in mindset and we have introduced new policies that allow us to look at OTS with an open mind.

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