Personal loans will grow faster than businesses: Sanjiv Chadha



MUMBAI : Bank of Baroda (BoB) expects its business loan portfolio to grow in the coming quarters as government spending picks up in the roads and energy sectors. However, the growth of personal loans will continue to outpace that of business loans, said BoB Managing Director and CEO Sanjiv Chadha. Edited excerpts from an interview:

Baroda Bank reported ??5,129 crore slippage in the first quarter, with a higher contribution from micro, small and medium enterprises (MSMEs) and retail segments. Have these borrowers not chosen the restructuring option?

MSMEs have been stressed for most of the past year. The second wave of covid was damaging. The files which slipped into non-performing assets could not be covered by a restructuring. Regarding the Emergency Credit Line Guarantee Scheme (ECLGS), almost 90% of the loans have been disbursed. It’s other than that. Last time, there were a lot of people who were offered restructuring, but they didn’t take advantage of it. Under the second wave, the option of a moratorium was not there. You see a certain decline in July. While the MSME challenges are structured due to the prolonged impact of the second wave, the retail stress is expected to dissipate in the coming quarters. It should be much more discreet.

Are you seeing a recovery in demand for business loans?

Some recovery is occurring in business loans. The road sector, renewable energies, town gas projects are experiencing a recovery in credit. The expansion of brownfields is underway. There is a demand, but it is not a throwback to the days before the pandemic. Compared to the previous year, the pickup takes place.

What would be the trade / business mix you envision?

The corporate segment has experienced an exaggerated decline because we have decided to let low yielding, high capital consumption loans flow. We believe there should be opportunities for higher yielding loans in the coming months. We should be looking at rebalancing so that the growth of personal loans exceeds that of businesses.

Both Vodafone Idea and the Future group appear to pose challenges for the banking sector. How do you see this affecting BoB?

Without going into discussions about any particular company, I would say that when it comes to telecommunications, our exposure is very limited and does not have a significant impact. When it comes to the retail industry, there is so much interest in the business and it suggests that something should work no matter what. There is also a restructuring that has been done on the retail account. In my opinion, this would have been a problem if there had not been a lot of interest in the company. With the lifting of the blockages, even independently, the company would be able to cope with them.

Does the bank intend to raise capital this year?

Not really because our capital adequacy is at 15.4% and the common equity Tier 1 (CET-1) ratio is at 11.25%, so we are comfortable in terms of equity. Additionally, what we are seeing in terms of loan growth the bank should be able to fund from internal provisions. At this stage, I do not anticipate any capital increase during the year.

Has the debt overhaul been successful in relieving stress?

Most of the first round debt overhaul has come from the corporate side, and this is something that should move forward. For MSMEs, we hope there will be a recovery in the next few months as the last year has been quite difficult. Overall, we don’t expect this book to be too much of a concern. Restructuring would pretty much get these companies through the tough times.

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