India’s third-most valued state-run lender, Bank of Baroda, anticipates receiving Rs 10,000 crore ($1.2 billion) through bad loan recoveries in the financial year ending March. This recovery is expected to be driven primarily by corporate and small-ticket loans, as stated by the bank’s Chief Executive Officer, Debadatta Chand.
Corporate Accounts and Insolvency
The bank has several corporate accounts under insolvency, which could significantly contribute to meeting the recovery target. These accounts are expected to play a crucial role in boosting the bank’s financial health.
Recovery Performance
In the first quarter of the financial year (April-June), Bank of Baroda recovered Rs 1,005 crore from bad debt. A significant portion of these recoveries came from small-ticket loans.
Gross Bad Loans
As of the end of June, the bank’s gross bad loans stood at Rs 30,873 crore, representing 2.88% of all loans. This is a slight improvement from the 2.92% reported at the end of March. Additionally, the lender’s net profit for the June quarter rose by 9.5% compared to the previous year.
Branch Expansion and Loan Growth
Bank of Baroda plans to add 250 branches in the current financial year. The bank aims to continue expanding loans to corporates, medium, and small enterprises while reducing the increase in unsecured loans.
Deposit Strategy and Market Conditions
The bank intends to focus on garnering low-cost deposits to maintain margins. Improved liquidity and an anticipated rate cut in the United States are expected to moderate the cost of deposits from October to December.
Growth Forecasts
Bank of Baroda forecasts a full-year loan growth of 12% to 14% and a deposit growth of 10% to 12%.
Impact of Central Bank Guidelines
The Indian central bank’s draft guidelines, aimed at enhancing the resilience of lenders, are expected to reduce Bank of Baroda’s liquidity coverage ratio by 12-15 percentage points from its current level of 138%.
Capital Raising Plans
To strengthen its capital base, the bank plans to raise Rs 7,500 crore through additional tier 1 and tier 2 bonds within this fiscal year. The timing of entering the market will be strategically decided to optimize benefits.
Infrastructure Bonds
Bank of Baroda is also considering raising Rs 10,000 crore through infrastructure bonds in the three months leading up to the end of December.
