The Bank of Baroda is relying on the corporate book to face the second wave

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Mumbai: State-owned Bank of Baroda (BoB) will rely on the strength of its corporate book to weather the second wave, even if small businesses and retail lending could be a source of discomfort.

Sanjiv Chadha, the bank’s chief executive officer, said Saturday that in relation to the second wave, the bank is likely to see a repeat of what it saw last year.

“Last year we were not confident about what would happen to the corporate sector. This time around, we can say with confidence that the second wave left the big corporations largely untouched, “said Chadha.

The lender has a corporate loan book of £2.92 trillion, almost unchanged from the last fiscal year. It’s the book for retail and micro, small and medium-sized enterprises (MSMEs) £1.2 trillion (14.4% higher than fiscal 20) and £96,200 crore (10.2% growth).

Chadha said that even corporate accounts that were relatively weaker and restructured in the past year would not require a revisit in most cases.

“Given that our book is 50% corporate, corporate lending performance will determine the overall bank impact,” he said, adding that like the first wave, the impact will have more of an impact on retail and significantly more for MSMEs.

So the problem areas remain the MSME sector and, to a lesser extent, the retail sector, he said. However, Chadha believes some of the recent measures announced by the Reserve Bank of India (RBI), like another round of debt recasting, will help borrowers.

On May 5, the RBI stepped in to bail out small business borrowers with loans of up to £25 crore, which allows lenders to restructure their debt and take a break from the stress caused by the second wave of the Covid-19 pandemic.

Eligible categories include consumer loans, education loans, loans to create or upgrade real estate such as residential property, and loans for investing in financial assets such as stocks and bonds. In a separate notice, the central bank also allowed MSMEs with loans of up to £25 crore to be eligible for a new version within the framework of the so-called Resolution Framework 2.0.

“We have the tools to address the problems that would arise from the second wave. We believe our overall credit quality will continue to improve, largely due to the fact that the corporate loan book will continue to evolve, “he said.

While there will be some encumbrances on retail lending, since the bank draws based solely on credit scores, the quality of the book is very good and withstands the effects of the pandemic, he said.

“After the moratorium, our borrowers came back and paid us, and we also have the added opportunity to re-address problems through restructuring. However, I believe that personal borrowers are very careful when deciding on recast. While there may be some crime in an installment or two, the entire book should get through, “he added.

The bank reported a loss of £1,047 crore in the three months ended March 2021 versus a profit of £507 crore in the same period last year. The loss was primarily due to the fact that it had been converted to the new tax system under Section 115BBA of the Income Tax Act and was a one-time effect of £3,314 crore.

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