Anil Khandelwal, Chairman of Bank of Baroda, expects a 25% credit growth in FY07. He says that BoB did not bid for UWB due to their existing presence in Maharashtra. He adds that the UWB branches will give IDBI good reach and size.
He says that the only worrying factor for Bank of Baroda is the rising deposit rates. However, he also says that the focus on SME and retail will keep NIMs stable.
Excerpts from CNBC-TV18's exclusive interview with Anil Khandelwal:
Can you give us an idea of how business is at the bank? What has been the credit growth for your bank domestically as well as internationally so far?
The bank is in the throes of transformation right now after having achieved over 38% growth in credit last year. The bank is firing on all cylinders right now, and it is restructuring its subsidiaries.
It is restructuring its international operations, and this year international operations are likely to show growth of 50%, which would be unparallel in the annals of Bank of Baroda.
We are also in the throes of technological transformation. We have had our first international connectivity last month with Dubai and Oman. We plan to have connectivity with UK and US this year too.
This September, during the World Bank-IMF meet at Singapore, we will also be inaugurating our branch at Singapore. So in the year we are trying to totally shape up our international operations, first. And second, we are expecting credit growth of about 25% this year.
For growth- are you looking at organic, inorganic? Why did you not bid for United Western Bank?
We were very clear with what we were doing. We were undergoing a lot of internal transformation, and I think that was not the time right to have another major agenda and deal with those kinds of issues. Bank of Baroda already has good presence in the Western sector like Gujarat and Maharashtra.
Also, we don't believe in merger for the sake of it, unless it is propelled by synergy. So as I said, right now we are well represented in Western India, and our hands are already full with internal transformation. So we don't want to open a new front.
As someone who has been part of the banking industry and watching this space for a long time, how have you read the move for IDBI and United Western Bank to now join hands? Do
From IDBI's perspective, it is very good. I think for IDBI to acquire a bank with 230 branches, is indeed a good addition to their portfolio. It will give them reach as well as the size, and that is required for IDBI. I am sure they can convert this into a good value.
What is your sense as a banker now on what happens to interest rates? Are you expecting to see or are you gearing up for any pinch at all in your credit off take?
Right now, after two interest rate hikes in the last six months, I don't see that pressure. The only thing that worries me is the rising deposit rates at this point of time and therefore I find that a very interesting situation for us to maintain our NIMs.
What might the case be in the next few quarters? Will the NIMs for a bank like yours get pinched or challenged a little bit because of those increasing deposit rates?
I don't think that will happen with the way we have planned things. If you look at it, even in the most challenging time last year, our NIMs had gone up from 3.31 to 3.39.
Even though we have started our SME (Small & Medium Enterprises) in a full-blown manner, under no circumstances would we make any sacrifice with NIMs. We have also started a retail loan factories concept, and that is being put into place.
Our retail banking is also coming up in a big way. So we should be able to maintain our NIM. We personally don't feel that there is any problem.
We are propping up our bank deposits in our rural and semi urban branches. In the metros, our focus is on current account.
But with the way the deposit scenario is prevalent in the industry, everyday we find a new advertisement, some private banks are likely to pose a challenge. But I personally don't think that would be the case for Bank of Baroda. Our policy at Bank of Baroda is not to sacrifice on NIMs
What kind of NIMs are you expecting, as you said you are at 3.39, are you hoping to sustain that or do you hope to improve upon that in the coming quarter?
In a challenging situation the important thing is to maintain it, and therefore we are making all efforts to maintain it.
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