For Bank of Baroda, the topmost priority is underwriting standards, the second is margins, and the third is growth, according to MD & CEO Sanjiv Chadha.

In an interaction with businessline, Chadha observed that he would like to see BoB grow as an organization, which has flexibility in physical footprint and human talent.

He emphasised the importance of balance sheet transformation so that the next time when there is a challenge in the corporate credit cycle, the bank is much more diversified in terms of exposure.

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What is your outlook for business in FY24?

Overall, I believe that as we go into the next year, credit growth, which has been about 20 per cent for us and fairly high for the industry, will moderate a little bit. On the liability side, interest rates have become real positive now. The outperformance of the equity market is also moderating. We used to talk in terms of managed funds growing faster than bank deposits. The lines between the growth of deposits and loans are going to converge next year. The credit-deposit ratio for us was about 75 per cent and is pretty much where it was 3 – 4 years back. We should be on a fairly comfortable footing as a banking system. The government in this budget has looked at the environment and said we need to move away from particular instruments, which are powered mostly by the desire to save taxes…now we are going to have a level playing field…If the savers have a choice, in terms of the attractiveness of bank deposits, we probably are going to be in a much better place in the coming years compared to where we were two years back.

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With the December quarter results being one of the best in many years, can you say that BoB’s journey of transformation is almost over now?

In our context, it is not necessarily the easiest thing to achieve….It was postulated that we’ll get about ₹10,000 crore of savings over a five-year period (post-amalgamation of Dena Bank and Vijaya Bank with BoB with effect from April 1, 2019). We are absolutely on track to achieve that. The growth in our cost is half of the peer banks. Our costs are growing by about 8 per cent, while NII (net interest income) grew by about 26 per cent and loan book by 20 per cent at a time when for at least two out of three years post-merger growth was very slow.  

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BoB has also become the second largest public sector bank (with total business of 20,73,385 crore as at December-end 2022) now. What next?

We have not chased top line and that is why over the last 2 – 3 years, when corporate spreads were not there, we chose not to grow. For us again, the topmost priority is underwriting standards, the second is margins and growth comes after that. At the beginning of the year, we had said the environment has changed, allowing us to keep growth and margin intact. So, we will grow aggressively. So, to your question on the future of the bank, I think, very frankly, we do not know the future…what can be done is to prepare the bank for an uncertain future. When we talked of BCs (business correspondents), it was in the context of operational flexibility. If you commit in terms of a fixed branch network, that flexibility goes away. Similarly, in terms of resources, the kind of people we require for banking operations is getting transformed because our customers have different expectations. So, increasingly, we’re looking at recruitment, which is specialised. We are in the market to recruit 500 wealth managers because that’s a very important part of the business. BoB has one of the largest wealth management services among banks because our presence is in Gujarat and Maharashtra and because of Vijaya Bank in Bengaluru, which has the highest concentration of HNIs. We are building those kinds of businesses. Collection was a skill, which was never really a strong point of PSU banks. So, we have brought in a collection head from outside the bank to build that function. The way I would see the bank is that it should be an organisation, which has flexibility in physical footprint and human talent. To say that this is where the bank is going to be after five years, to my mind is arrogance because you do not know how the world is going to be. But you can have the humility to say that I will make sure that the bank has the flexibility to adjust to the world, which is going to emerge tomorrow.

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You mentioned about corporate loan growth making a comeback…

We believe the margins are allowing us to grow faster. In Q3, the corporate loan growth was 13 per cent YoY. But we also recognise that if we look at the last few years and episodes, most challenges to banks have come from the corporate portfolio because by definition, it is not granular and if there is a challenge, it hits you significantly. We believe that public sector banks in general, including us, are slightly overexposed to the corporate segment, and slightly under-penetrated in the retail segment. So, our stance has been that we would want to grow at the market rate or better, make sure that we protect the market share. But, while growing at the market rate or better, the growth rate of our retail should be about 1.5 times our growth rate. Corporate should grow at 0.6 – 0.7 times so that over time, we are able to achieve balance sheet transformation. The next time when there is a challenge in corporate credit cycle, we should be much more diversified in terms of exposure.

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Why are you strengthening your BC network? 

bob World (mobile banking app) alone cannot be used to service our customer base. So, we grew our BC (business correspondent) network. Three years back, the proportion of our branches to BCs was about 1:2. We have taken that to 5:1 – 8,300 branches and more than 40,000 BCs. We are able to service rural customers at their doorstep. That’s something which is very powerful and we’re very proud of because we make the highest contribution to financial inclusion. Our share in Jan Dhan accounts is 17 per cent…There is no other bank that makes this kind of contribution to Jan Dhan. Equally, this has meant that branch capacity is now being vacated to do other kinds of business. We are trying to make sure that we put more and more BCs so that BC operations also become viable. There’s been nearly a 50 per cent increase in the payment we make per BC. They have the incentive to invest, grow, and service customers. Since it’s a zero-fixed-cost model and scalable, there is no limitation to the growth you can have there. For us, now the opportunity is to use both - the digital channel and the BC channel to do many more things.