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Bank of Baroda CEO Sanjiv Chadha
Bank of Baroda CEO Sanjiv Chadha

See recovery in business to sustain going ahead, says Sanjiv Chadha

He said that owing to the lockdown, recovery efforts were hamstrung significantly in Q1 and it has seen a rebound since then

Mumbai: Public sector lender Bank of Baroda (BoB) believes that the improvement in its operating performance in the September quarter is sustainable and the bank is seeing rebound in client activity.

“The improvement that we see in the bank’s performance seems to be sustainable based on two main pillars of reduction in cost of deposits and in growth in advances," said Sanjiv Chadha, chief executive, Bank of Baroda.

The bank reported a more than doubling of its net profit in Q2 to 1,679 crore, on the back of higher net interest income (NII) and lower provisions.

“What seems to be clear from the results is that there has been a sharp recovery after the lockdown in Q1. The fee income of the bank had dropped sharply in Q1 and we see a sharp rebound in Q2 and also a reasonable improvement as compared to the similar period last year," said Chadha.

He said that owing to the lockdown, recovery efforts were hamstrung significantly in Q1 and it has seen a rebound since then. That apart, loan disbursements and sanctions have recovered to levels higher than the corresponding quarter last year, he said.

“The bank has rebound sharply from the challenges that we saw in Q1 and we are pretty much close to our normal trajectory in terms of most key parameters," said Chadha.

According to him, the bank has been emphasising on growth in the retail portfolio to balance its corporate book and this recovery and growth momentum seen in Q2 are expected to continue. As of 30 September, 45% of the bank’s loanbook was tilted towards corporates, while retail constituted 21% and the rest were spread across small businesses, agriculture and others.

Its asset quality improved in the September quarter and has had a little help from the Supreme Court’s standstill on asset quality for a specific set of borrowers. The Supreme Court on 3 September ordered an interim stay on classifying bad loans if not declared so by 31 August and banks are expected to use this relaxation in the September quarter or till the final orders are passed.

BoB said in a statement that if the bank would have classified these borrower accounts as non-performing, the gross and net bad loan ratio would have been 9.33% and 2.67%, respectively. That said, recoveries also seem to have improved on a sequential basis, albeit lower than the same quarter last year.

“How is the credit book likely to hold up? Here we believe there is some room for optimism. As you would be aware there was a large proportion of accounts under moratorium and there was speculation if that was some kind of proxy for likely stress going ahead," said Chadha.

Chadha also said that the bank has as a policy decided to grow the deposit book in tandem with the loan book. “There is a very large overhang of liquidity and it is possible to grow deposits more aggressively but we are conscious that every rupee that you gather in deposits and cannot deploy fruitfully is something which has an impact on our margins," he said.

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