A large part of BoB corp book to remain unscathed | Economic Times

Bank of Baroda, India’s third largest, with clients ranging from billion-dollar corporates to a motorcycle buyer, has a pulse on the economy. Its CEO Sanjiv Chadha, in an interview with Joel Rebello and MC Govardhana Rangan, said that defaults may not be as bad, but the question mark on speed of recovery remains. Edited excerpts:Payments moratorium is behind and unlock has been in progress for some time. What is your reading of the economy?The environment is challenging but our portfolio is pretty balanced with 48% corporate and the rest is retail, agriculture and MSME. The corporate book has seen a lot of stress in the last two or three years so to that extent we have been pleasantly surprised because the stress post-Covid is less than what we anticipated. We believe that a large part of the corporate book will come through unscathed.Retail seems to be a bigger worry for many lenders…Our retail book is 20% less than the 40% to 50% that some private sector peers have. That book has a bit of challenge because it has not been tested. About 75% of our retail book is home loans which is secured.What is the sense that you got from the moratorium book? We started out with an opt-out, which meant we gave you a moratorium without you asking for it. In the second phase, up to ₹10 lakh, we said it was opt-out and after that you have to ask for it. That reduced the moratorium book from 65% to 35%. Today, term loans under moratorium are 20% of the book and a significant percentage of them paid us dues in August. People were uncertain and wanted to preserve liquidity in April. Moratorium is, therefore, not an accurate assessment of how the restructuring will work.A lot of your private sector peers have raised capital in anticipation of rising stress. What is your plan?Our board approved to raise ₹9,000 crore of equity capital and ₹4,500 crore by way of AT1 bonds. About ₹1,700 crore of the ₹4,500 crore AT1 bonds has been done and as and when the market conditions are conducive, we will raise the remaining bit as well. Maybe in the second half of the year we will see whether it is the opportune time to raise equity.How about provisioning in future, especially after restructuring?We were looking at 3-4% slippages in the last few years and we provided 20% instead of the 15% mandated by the RBI. Some of the new slippages will now get restructured and the provisioning for them will be at 10%. Restructuring and slippages will not be much out of whack with what we have seen in the past.