‘Retail segment is waiting to be mined’

Vikramaditya Singh Khichi, executive director (ED), BoB

Bank of Baroda (BoB) expects to grow above industry levels in the next financial year. In an interview, Vikramaditya Singh Khichi, executive director (ED), BoB, highlights the reasons to Ankur Mishra for the bank’s stellar growth in the home loan segment. Excerpts:

What has been your strategy for retail loans amid Covid-19? Is there a deliberate move to focus more on retail loans?

Though the pandemic brought tough challenges, it also gave us the opportunity to make greater use of the digital mode to get leads and keep our focus intact. The retail loan segment is an important part of our growth story and it figures prominently in our overall strategy.

Do you believe the momentum in retail loans will be maintained? What is your outlook on growth in advances in the current financial year and the next one (FY22)?

Yes, we are optimistic about continuing growth in retail loans as the macro-economic indicators point at under penetration in this segment. For example, in home loans, the penetration level is just 10%. At Bank of Baroda, the retail loan book is growing at more than 13% on a year-on-year (y-o-y basis and in the home loan segment, by around 12% y-o-y, which are above industry levels.

Growth is expected to be robust in the next financial year, and we hope to continue growing at above industry levels. By when will the bank achieve double-digit growth in (overall) advances?

The bank is doing well in various retail loan products, viz housing loan, auto loan (around 22% y-o-y growth) and education loan (around 10% y-o-y growth), and is also growing higher than the industry in overall advances. We expect to maintain the same tempo in the future, even accelerate growth further.

How are you placed on disbursements and collections? Are these back to pre-Covid-19 levels?

We are almost at pre-Covid19 levels on disbursement and collection parameters.

You have achieved double-digit growth in the home loan segment. What strategy have you employed?

It is a result of good products, pricing and processes, the hallmark of our bank. We have access to high-quality borrowers through bureau scores and we are able to price our products very competitively. The repo rate changes made by the Reserve Bank of India (RBI) in the early part of the financial year provided existing home loan borrowers an option to shift their home loans from non-banking financial companies (NBFCs)/housing finance companies (HFCs). And this came as an opportunity for us to grow the home loan business. The launch of new specialised mortgage stores and product innovation also contributed to the growth we have achieved. The third quarter of this fiscal saw perceptible growth in new home sales across the metro cities, thanks to good offers from developers, some property price correction and interest rates being at an all-time low in the segment.

Do you think there could be a build-up of stress in the retail book? To what levels do you expect retail NPAs to rise? How do you plan to address the issue?

As we are already at the pre-Covid-19 level, we do not foresee any major increase in stress in the retail book. As I mentioned earlier, we are focused on quality growth. Around 73% of our borrowers have a bureau score above 725 and 84%, above 700. There is therefore no cause for undue concern as regards the stress levels.

How are you placed on provisioning?

The bank has made adequate provisions as of December 2020 (Q3 FY21), in conformity with regulatory guidelines as well as the Supreme Court (SC) order. The Provision Coverage Ratio (including Two) was above 85% in Q3FY21. The bank is setting aside 20% for substandard category assets, as against the regulatory requirement of 15%. We make appropriate provisions whenever the situation warrants.

Any plans to raise more capital this fiscal, given that you have already raised over `3,700 crore through tier-1 bonds?
The raising of capital depends on the bank’s requirements and the market scenario. In FY2020-21, we have raised a little over Rs 8,200 crore, which includes equity capital of Rs 4,500 crore through the qualitative institutional placement (QIP) route recently.