As part of an ambitious plan to double its business (including deposits and advances) to ₹48 lakh crore over the next five years, Bank of Baroda (BoB) is set to open 600 new branches in the coming two to three years. In an interview, BoB’s Managing Director & CEO, Debadatta Chand, who took charge in July 2023, emphasized that this growth initiative will focus on the “RAM” (retail, agriculture, and MSME) segments to enhance the bank’s loan portfolio.
When asked about their roadmap, Chand noted that BoB projects a compounded annual growth rate (CAGR) of around 11.6% for its business. Last year, the bank achieved similar growth, and this fiscal year, it plans to open 300 branches, with 107 already operational. Chand explained, “Our branch expansion will support our growth, with progress depending on market conditions. We’re confident that we’re moving in the right direction.”
Organic Growth as the Main Driver
BoB is primarily focusing on organic growth rather than looking for acquisitions or portfolio buyouts. Chand emphasized that with over 8,200 branches and the planned addition of 600 more, BoB’s extensive network will fuel business growth. Chand clarified that the target to double business may be reached earlier or later, depending on various factors, but the path is clear.
On the topic of mergers, Chand ruled out any immediate plans, noting that BoB is focused on the ongoing disinvestment of Nainital Bank, where it holds a 98.57% stake. Additionally, BoB is working toward an initial public offering (IPO) for its IndiaFirst Life Insurance Company within the next 9-12 months.
Adjusting Growth Targets for FY25
BoB recently revised its FY25 credit and deposit growth targets to 11-13% (down from 12-14%) and 9-11% (down from 10-12%) respectively. Chand attributed this adjustment to the banking sector’s slower deposit growth, which prompted the bank to adopt a more realistic growth approach. “Our deposit growth in the second quarter was 9.1%. To hit a higher target, we’d need faster growth in the second half, so we calibrated our goals to better reflect the current market scenario,” he explained.
Maintaining a Balanced Credit-Deposit Ratio
BoB’s new growth targets were also set with an eye on maintaining a stable credit-deposit (CD) ratio. Chand noted that while the bank could rely on market borrowings to bridge gaps, it is vital to balance deposit and advance growth to avoid further increases in the CD ratio. Currently, BoB’s global CD ratio is at 83.8%, and the bank aims to bring it to 82% by March 2025.
Emphasizing Retail Expansion
BoB’s retail assets have consistently grown by 23-24% over the past two years, and the bank continues to push for retail deposits through savings and term accounts. “Our RAM (retail, agriculture, MSME) portfolio now makes up 58% of our domestic loans, and we plan to raise it to 65% in three years,” Chand stated. This shift towards retail aims to stabilize margins, moving away from corporate lending’s volatility.
In summary, BoB’s strategy includes branch expansion, a focus on organic growth, and a retail-oriented loan portfolio, all designed to achieve its ambitious goal of doubling business by 2029.