MC Interview | Resolution of large NCLT accounts boosts recoveries in Q2: BoB chief Debadatta Chand

Debadatta Chand, MD & CEO, Bank of Baroda

Resolution of a number of large accounts by the National Company Law Tribunal (NCLT) has translated into higher recoveries for state-run Bank of Baroda in the second quarter of this fiscal, Debadatta Chand, who is the managing director and chief executive officer, said in an interview with Moneycontrol.

“We had some large accounts in NCLT, which was resolved during the quarter. These were a combination of accounts referred by us and other banks to the NCLT,” he said.

In the July-September quarter, the lender recovered Rs 2,525 crore from accounts which had technical write-offs. This was sharply higher compared to Rs 554 crore collected a quarter ago and Rs 1,231 crore a year back.

Further, Chand said that the stake sale process in Nainital Bank is still on and divestment in IndiaFirst Life Insurance company could happen in the next 9-12 months.

Excerpts from the interaction:

Most private banks have elevated delinquencies in unsecured business. How do you see the scenario for Bank of Baroda?

Last year, we announced that we would moderate growth rate in unsecured loans, and now the proportion of these loans has gone down. Meanwhile, we have done a few changes in our books. First, the underwriting model has been changed based on the press data we have and a couple of physical underwriting factor. For instance, in a couple of sectors where we didn't have the salary cash flow, we have placed some restrictions.

For this reason, the growth has moderated significantly from the year-ago level. We do not see any additional stress coming out of this.

Will you go slow on MSME loans because of increased slippages during the quarter?

MSME book on the NPA basis has reduced significantly compared to what it was two-and-a-half years ago. We have a balanced portfolio on MSMEs. The bank is upsizing the MSME growth which is currently at 11-12 percent and may increase to 14 percent going ahead.

A couple of things that we have done on the MSME front are internal processing of loans and complete digitalisation of the process of MSME underwriting. A product, called cash management that we were extending to corporate borrowers, is being offered to MSME borrowers for their cash flow management.

With all these measures, we will grow at a higher rate on MSME loans. We will be growing at almost 2-2.5 percent higher than the current growth on MSME and I do not think any slippage can be significant for us to slow down the growth.

What was the impact of the new penal charge norms?

This quarter the impact is Rs 179 crore and it was Rs 13 crore in the last quarter.

What factors helped boost recoveries in Q2?

We had some large accounts resolved through NCLT during the quarter. These were a combination of those referred by us and other banks to the NCLT.

Do you expect more recoveries from accounts referred to NCLT?

Many accounts are in advanced stage of decision. We do not normally give a guidance on the NCLT recovery because that has contingent on the process. It is good enough at this stage to assume that there may be some more recoveries going forward.

What is the progress on stake sale in IndiaFirst Life Insurance and Nainital Bank?

A new CEO has taken charge at IndiaFirst Life Insurance. In the next, 9 to 12 months, we expect to hit the market for an IPO.

As for Nainital Bank, the (stake sale) process is on. It has its own time and processes to complete.

Do you have any plans of selling other overseas operations?

No. After Oman, we have only one foreign entity, where the process is on in that host country. Beyond that, no further sale plan is there as far as the current financial year is concerned.