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‘We Have Been Performing Better Than Our Peers’
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Why do you think the Current Account, Savings account (CASA) growth for Bank of Baroda is showing a decline in 2010-11?
Our CASA has grown by about 22 per cent in 2010-11. In the context of the overall pressures on CASA, which the industry has been facing for quite some time, our bank has done better than its peers. Although CASA growth has been strong, our other liabilities have grown correspondingly. So, yes, there has been a marginal reduction in CASA, as a percentage of the total deposits (at 34 per cent).
CASA growth has been sustainable, which shows that the growth has been positive. A larger number of customers have been added with varied profiles, from different geographies, which shows that the bank has been able to do well in difficult conditions.
Our new marketing initiatives include Business Process Re-engineering which deals with converting branches into sales outlets and removing back office functions out of the branches.
We would be happy to maintain our CASA percentage at 34-35 per cent for FY 11-12.
Advances' growth also slowed in 2011-11. Have there been some concerns?
Advances as a whole for the industry would have grown about 22-23 per cent in FY10-11, while we grew by about 25 per cent (domestic). There have been lots of initiatives taken in credit origination, in terms of segmentation.
We were one of the first ones to launch retail, SME, corporate and rural verticals. We have opened centralized hubs, branded as loan factories in our retail and SME areas. There is very strong and qualitative credit origination from these loan factories. This segmentation has been our strength as far as credit is concerned. Our asset quality continues to be strong despite challenging economic conditions and our non-performing assets are amongst the lowest in the industry.
Are you facing any stress on asset quality?
In a scenario where interest rates keep on increasing, there will be concerns over asset quality. So, yes, there are challenges to be faced as far as protection of asset quality goes and ensuring overall asset quality strength is maintained.
Our delinquency numbers were 1 per cent in the first quarter of this fiscal. Our gross and net NPAs have been stagnant too.
You seem to have a good set of credit-deposit ratio numbers too.
Credit –Deposit ratio for our domestic business is about 74-75 per cent, which indicates proper utilization of the funds mobilized. We need to ensure that we have resources to lend, but we should over-mobilize resources that cannot be deployed or we cannot have a shortage of resources when a lending opportunity arises.
Both our domestic and global businesses have shown good growth in deposits. Our central sales unit ensures we appropriately tap customers, not just for deposits, but for lending too. The bank has a large number of corporate relations and we tapped that to get into the corporate salary account area.
We also focus on pensioners to get CASA as well as term deposits. We refrain from over relying on bulk funds, and do not offer abnormally high interest rates. We ensure that overall asset-liability is maintained and the cost of raising deposits is also moderated to the maximum extent.
What's your FY11-12 forecast for credit demand?
Overall credit demand in recent months has been subdued, but has been the intended outcome of the policy initiatives which the RBI has taken. The intention of the rate hikes is to restrict overall credit flow of the system. With a fall in the credit growth for the industry, our credit growth is also slightly less than last year's.
We expect our domestic credit growth to be around 21-22 per cent in this fiscal, when the industry might see a 18-19 per cent growth.
How has the balance sheet growth (29 per cent in FY 10-11) been for the bank?
We expect a growth of 23-24 per cent in this fiscal, due to lower credit growth.
Are you expecting any stress on your treasury income?
Government securities have been facing interest rate pressure for some time now and we are seeing what we call an increased bias as far as interest rates are concerned. So, trading profit on sale of bonds has come down drastically. So, yes, there will be pressure on our treasury income.
But, this needs to be off-set by improving other avenues of fee-based income. Profit through forex transactions has shown very good growth, fee-income related to credit related activities like processing charges, syndication charges etc. the sale of third-party products like insurance, mutual funds are also avenues that need to be explored.
Our overall fee-based income is growing at 15-20 per cent per year, which is a good growth.
Are you planning to raise any off-shore funds?
Not at the moment. We raised one tranche of Medium Term Notes (MTN) in February 2011 when we raised $500 million. Our asset-liability situation in the overseas market has been strong, so there is no immediate need to raise resources abroad. The bank is quite liquid, and the maturity profile of resources being raised abroad are quite favorable.
However, we will keep an eye on the market and if resources are available at reasonable rates, we could think of raising funds abroad. But because of the various developments in the recent past, money market situation abroad is not favorable to raise resources.
How has the bank's Capital Adequacy ratio been for the bank in FY 10-11?
Our CRAR as of March 2011 was around 14.4 per cent, of which Tier-I was 10 per cent, which suggests it is quite strong. Substantial headroom is available to raise Tier-II and II funds, in case of need. Last year, the government infused Rs 2,600 crore which raised its holding to 57 per cent from 53 per cent earlier.
How many branches are you planning to add this fiscal?
We are planning to add about 500 domestic branches this year. We had about 3400 branches at the beginning of this year, we would like to be at 3900-4000 at the end of the year. We already have RBI authorization. In the first half of the year – up to September – we have opened about 120 new branches.
Overseas, we have 86 offices which include those of our subsidiaries. We plan it take it to 100 by March.
Have you zeroed in on the locations?
Yes. Many of these branches will be through the subsidiary route. We will have branches in Kenya (currently 11, planning to open 3 more), Botswana (currently 2, will open 1 more), Uganda (currently 12, planning to open 3 more), New Zealand (add 2 more to the current 1).
We will be starting a joint-venture company in Malaysia (Kuala Lumpur), which may happen in November -December. It is a JV with the Indian Overseas Bank and the Andhra Bank, but 40 per cent will be held by us. There will be a couple of Electronic Banking Service Units (EBSU) in the gulf area.
We expect the regulatory approval to come for Australia (Sydney) by the end of this year.
What is your bank doing to keep a check on asset quality?
Our credit origination is very strong to maintain the high quality of the assets acquired. Going forward, there could be cyclical upheavals hence it is important to continuously monitor one's portfolio, especially small ticket advances, including retail.
Using technology, we reach out to retail customers in advance for their payments (like housing and vehicle loans). For mid-corporate and larger accounts, we have a credit monitoring cell which does a continuous follow-up.
In case there is a need to restructure an account due to economic reasons, we do allow so.
Is there any pressure on margins for you?
The sector as a whole is facing a number of challenges given the current scenario - maintaining margins, asset quality and capital requirements. Our provisioning continues to be high at 83-84 per cent, and would like to maintain it above the regulatory requirement of 70 per cent.