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As part of its plan to double its business (deposits + advances) to ₹48 lakh crore in five years, Bank of Baroda (BoB) aims to add 600 branches in the next two to three years even as it seeks to further increase the “RAM” (retail, agriculture and MSME) tilt of its loan portfolio.
In an interaction with businessline, MD & CEO Debadatta Chand, who took the helm at BoB on July 1, 2023, noted that the public sector bank revised its credit and deposit growth targets for FY25 lower in order to moderate the credit-deposit (CD) ratio.
How will you go about doubling your business in five years?
Our normal assumption is that business (deposits plus advances) will grow at a CAGR (compounded annual growth rate) of 11.6 per cent. Last year, our growth rate was almost around this level. We intend to open 600 branches in 2-3 years. This year, we are targeting to open 300 branches.
We have already opened 107 branches so far this year. Branch expansion will also help increase our business. The business doubling roadmap will depend on the market conditions. It may either happen within five years or after that. But at least we have a roadmap to work on and grow. And we are moving in the right direction at this point of time.
Are there any inorganic growth (loan portfolio buyouts) plans?
Our business model is more organic growth oriented than inorganic. Whatever top-line growth we are targeting is based on organic growth. We don’t want to take the inorganic route. Our 8,200 odd branches will give us a certain level of business in five years.
Further, planned branches additions (600 to be added in the next 2-3 years) will help chase down the target of doubling our business. This target is a rolling one – it may be achieved either earlier or later.
Will you consider merging Nainital Bank with BoB if the RBI circular on “Forms of Business and Prudential Regulation for Investments” is implemented as it is?
Currently, there is no inorganic growth/merger that is being considered. We want to grow the organic way. The disinvestment process (of Nainital Bank in which BoB has 98.57 per cent stake) is on. Such processes normally take their own time for closure. We are pursuing plans for IndiaFirst Life Insurance Company’s IPO.
There is a plan for its IPO in 9 to 12 months.
Why did you lower FY25 credit and deposit growth targets to 11-13 per cent (from 12-14 per cent earlier) and 9-11 per cent (10-12 per cent), respectively?
Initially, when we gave guidance for the full year (FY25), the scenario was different. In the first half, deposit growth of the banking system has been relatively slower.
We had a deposit growth of 9.1 per cent in Q2FY25. In order to achieve 10-12 per cent deposit growth for FY25, we have to grow higher than this in the second half. So, we thought that we should be more realistic in terms of calibrating the growth on both deposits and advances side.
What effect will the revision in credit and deposit growth targets have on your credit-deposit (CD) ratio?
Recalibration of credit and deposit growth targets has been done keeping in view the CD ratio as one of the parameters. We can very well borrow from the market and manage the deposits and advances growth gap. That we have done. But if deposits continue to grow at a much lower rate than advances, the CD ratio would worsen further.
Now, after taking into account the market scenario (of credit growth outstripping deposit growth) that we and the system have been facing, we realigned the growth target on both (assets and liabilities) sides. This will also keep the CD ratio fairly balanced at around 82 per cent. So, this recalibration will have a positive impact on the CD ratio, moderating it from the current level.
How much will the CD ratio moderate to?
We have a large international book. If you see the data for the last five quarters, the peak CD level was 120 per cent for this book. This has come down to 96 per cent. We are quite comfortable with the domestic CD ratio, which is at 81.58 per cent.
So, our global (domestic plus international) CD is at 83.8. We are targetting a CD of 82 per cent by March 2025. Thereafter, depending on the liquidity, we will recalibrate the CD ratio.
Could you explain the “retailisation” of your loan portfolio?
Retail assets have been growing at about 23-24 per cent over the last 8-9 quarters. And in the second quarter, the growth is almost 20 per cent. This stepped growth itself would move the needle towards the retail book.
On the deposits side, we are pushing for more savings and term deposits from retail customers. Our growth on this front has been better than the system as of today. So, that focus would continue. So, we are focussing on retail deposits and advances. As of today, RAM (retail, agriculture and MSME) portfolio accounts for about 58 per cent of the domestic loan book. There has been an improvement of almost 100 basis points in this portfolio since March 2024.
We intend to take this proportion to 65 per cent in three years time. We want to get the full benefit of our large branch network/touch points (BC agents). This is something we are working on. Dependency on corporate book sometimes would lead to volatility (in margins), which we do not want. We have fairly stabilised this loan book. ...But retail loan growth would be higher than corporate.
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