BoB to focus on retail; expects tariffs, geopolitics to impact credit costs by over 0.2 pc

Mumbai, Nov 3 (PTI) State-run Bank of Baroda expects US tariffs and the evolving geopolitics to impact its credit costs by over 0.2 per cent, a top official said on Monday.

Debadatta Chand, the bank's managing director and chief executive, said it will aggressively grow its home loan book until its market share in the segment matches the bank's share in the overall loan market.

Despite an improvement in the asset quality, the bank is sticking to its overall credit cost guidance at 0.75 per cent pending clarity on certain aspects, including the impact of tariffs and emerging geopolitical events on its book, Chand said, pointing out that international exposures constitute 17 per cent of the overall loanbook for the bank.

"The initial impact on the credit cost, on a ballpark number, back of the envelope calculation, is almost 0.20 per cent to 0.25 per cent," Chand said in an interview to PTI.

On Friday, Chand had said that the bank's asset quality has not been adversely impacted by tariff-related factors, but flagged risks arising from geopolitical events, noting this is one of the reasons it is maintaining the credit cost guidance at 0.75 per cent.

Elaborating on the same, Chand said on Monday that everybody knows the two sectors are most impacted, and added that the bank is constantly monitoring the portfolio to identify any incidents of stress.

He also hoped that a relief package would be announced for the affected sectors and assured that the bank would consider such entities sensitively.

Meanwhile, replying to a question on the home loan market, where some private lenders have blamed state-run banks for irrational pricing, Chand made it clear that BoB will maintain its aggressive stance until its mortgage market share improves.

Making it clear that the aggressive 7.45 per cent offering is only for best-rated customers, Chand said the overall portfolio yield on home loans is higher than that of the corporate segment.

Some banks may have a disproportionate market share and may be going slow on home loans, but BoB wishes to climb up the market-share ladder, Chand said, hinting that the aggressive posturing will continue.

On the issue of small enterprises and risks thereof, Chand said the bank is very positive on lending to micro, small and medium enterprises, and added that one must also look at the benefits of schemes like credit guarantee trust for micro and small enterprises while assessing the losses for the bank from it and not limit to seeing the slippages alone.

The faster growth in corporate lending in the second half of the fiscal year will not put pressure on the net interest margin (NIM), he said, pointing out that the entire Rs 40,000 crore in sanctions yet to be disbursed is at a rate with which the bank is comfortable.

The entire deposit base will get repriced by the March quarter at a lower level, which will also aid the number, he said.

The bank has been able to grow its foreign loan book by becoming a part of the global debt syndication market, where it gets access to a large part of good-quality foreign loans, Chand said, adding that once clarity emerges on the tariffs and geopolitics, it may also look at expanding its global presence.

The Gift City branch is more effective at serving clients in the Asia Pacific region, he said. However, the cost of borrowing in the IFSC is relatively higher than in global financial centres, he said.

The BoB scrip closed 4.60 per cent up at Rs 291.1 apiece on the BSE on Monday, as against 0.05 per cent gains on the benchmark. PTI AA DRR