Money & Banking

Bank of Baroda to buy around Rs 6,000 cr of securitised NBFC loans in Q2

PTI Mumbai | Updated on August 26, 2019 Published on August 26, 2019

A ray of hope, for now The bank’s earnings coming back into the black in the June quarter may lend comfort to investors

The second largest state-run lender, Bank of Baroda, is looking to buy out assets worth around Rs 6,000 crore from the fund-starved non-banking finance companies this quarter, a senior bank official said on Monday.

The lender had bought around Rs 3,500 crore loans from NBFCs in the June quarter, while for the year to March 2019, it had purchased assets worth around Rs 10,000 crore from NBFCs/ housing finance companies.

“We are expecting to do around Rs 6,000 crore (asset purchases under direct assignment) this quarter,” Executive Director Papia Sengupta told presspersons here.

The bank is in discussions with NBFCs/ HFCs such as PNB Housing Finance, Indiabulls Consumer Finance, IIFFL and Annapoorna MFI, among others, an official said.

Sengupta said some of the assets would be bought under the partial guarantee scheme, for which lenders will obtain permission from the government.

In the Budget, the government had said it would provide a one-time six months’ partial credit guarantee to public sector banks for the first loss of up to 10 per cent on purchases of high-rated pooled NBFC assets, amounting to Rs 1 trillion.

The lender is also targeting to disburse Rs 1,000 crore under the Reserve Bank’s recently introduced co-origination model between banks and non-banking financial companies this quarter, and has already lent Rs 50 crore to Srei Finance and Edelweiss Financial.

The bank is also in talks with 10 more NBFCs and micro-finance companies, including Cholamandalam, Indiabulls Housing, Adani Capital, IIFL Finance, Hero Housing, and Centrum Housing, among others, for this.

“While we have already started co-origination of loans, it will take around two to three months to reach scale. This quarter we are looking at Rs 1,000 crore of loans under this scheme,” Sengupta said, adding the rate offered to these customers will be a blended one.

“It will be win-win for customers as we will be offering a rate that we charge to our customers,” she said. The bank will be looking at various segments such as SMEs, housing and loan against property under the scheme.

Sengupta said RBI has clarified that co-origination of loans is not only for creating priority sector assets, but also for non-priority sectors.

“The first thing that comes is it is for the priority sector, but RBI has never said it is not available for non-priority sectors. In fact, our policy covers both priority and non-priority sectors and when we asked for a clarification, RBI said clearly that it does not bar us from taking it for the non-priority sector,” she added.

The lender is also looking at onward lending of Rs 3,500 crore to corporate and agri-finance in the quarter.

The BoB counter closed 1.71 per cent higher at Rs 95.05 on the BSE, while the benchmark rallied close to 2.2 per cent.

Published on August 26, 2019
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