Bank of Baroda's (BoB) newly-appointed chief executive Sanjiv Chadha is looking to put greater focus on lending to corporates and wants to fill the space vacated by some private and even public sector banks, in pursuit of retail credit. In an interview to Mint on Monday, Chadha said, while he wants to capitalize on the opportunities in corporate lending, he also intends to improve risk management capabilities of the bank to make sure the lending is sustainable. At the end of December quarter of FY20, the bank’s corporate loanbook stood at ₹2.7 trillion, down 2% on a year-on-year (y-o-y) basis. Chadha also said that investments made during his predecessor's tenure will start yielding results.

A week into your tenure as the chief of BoB, what are your priorities?

BoB is in a very interesting place. It was among the first banks identified for the merger process and has made a fair bit of progress, pretty much as per the plan. Therefore, as the merger plays out, the bank will be well-positioned. It will have a larger scale and also a lot of investments that have been made over the last few years under the erstwhile chief executive P S Jayakumar’s leadership will start to play out. Particularly in specific areas of supply chain financing which is getting a lot of traction. Efforts made by him in trying to induct market talent, positions us uniquely. My job is to consolidate whatever things have happened at BoB over the last few years and give support required to flesh out these initiatives so that they bear fruit

What will be your focus in terms of credit growth?

The market dynamics are also getting altered to the benefit of the bank. When it comes to the corporate lending space, there is a lot of space that is getting vacated because banks seem to believe that retail banking is the only place to be in. I would believe there are opportunities in the corporate banking space and with the number of players becoming fewer, whoever remains will have more pricing power than in the past. That will work in BoB’s advantage, I believe. Also, one of the investments made by the bank was with regard to working with fintech companies and NBFCs and these are also areas where we see a lot of opportunities. We have worked with NBFCs as passive lenders and now there is an opportunity to work in a much more active manner.

What kind of an opportunity do corporate loans provide at the moment?

The fact is that as of now the number of players is very limited. Large private sector banks have put on record their disinclination to get into certain parts of the corporate lending space. There would also be a large number of public sector banks who would be embarking on their journey towards merger. Then there are large NBFCs, very competitive in this space, are also constrained in terms of funds. So, as I was saying, there is not only space but also a requirement for a bank like BoB to play a more significant role. Of course that role must come with an ability to manage risks far better than the industry for large lending in the past. My focus will be on building the ability and the competencies to fund corporates and to build the risk-management abilities to make sure it is done in an intelligent and sustainable manner.

Where do you see the balance sheet over the next three years?

Bank of Baroda has the potential to grow at a rate better than the industry rate and the circumstances are propitious. Also in terms of capital, we are reasonably capitalized. We have the intention of working with other partners to make sure that we can work together to make delivery much more efficient and be able to do much larger volumes. We should be growing at better than industry rates.

Apart from non-banking financial companies (NBFCs), which are the other sectors that you are slightly wary about?

In every sector today, you need to distinguish between players - which are the stronger players, which are the weaker players and even within players that you deal with– what are their strengths and what their weaknesses are. If you look at our NBFC portfolio, about 90% of that is rated A and and above. I think it is a great opportunity for the bank to work with intermediaries who have the last mile connectivity. When I look at the NBFC sector, I don’t look at it with trepidation, but an opportunity to capitalize upon.

Do you see signs of stress building up in the retail sector, especially the unsecured portfolio?

I see no secular trend which suggests that there is stress building up. Whenever there is slowdown there would be implications. But there is broad consensus that growth should pick up again. For an economy like India, if you are a serious long term player, you cannot be dependent upon any single engine of growth. You can always trim your savings. You need to have multiple engines firing to grow sustainably. For BoB, both retail and corporate are equally important.

Is the integration of three banks complete?

As per the plan that was laid out, the integration was to happen over 18-24 months. When you are a bank, you need to make sure that the process is non-disruptive. Things have gone largely as per planned. Progress has been made and some of the changes will play out over the next 12 months.

Would you continue with the predecessor’s legacy or would you look at making changes?

I deeply respect the work that been done by Jayakumar. The first task would be to capitalise on the value of the changes. Along with that one of the lessons for BoB, but also for the entire banking industry, risk management needs to be strengthened. The kind of issues that banks as a general proposition had with regulators would suggest that compliance structure also needs to be strengthened.

How resilient, do you think, is the Indian financial system to shocks?

I think that the Indian financial system in India is very robust and has stood the test of time and also has successfully catered to the need to industry, agriculture and even taken financial inclusion to far corners of the country. Also, in terms of serious issues like banks getting into difficulty or the interest of the depositors compromised, I think India possibly has the fewest instances. I agree with the Reserve Bank of India (RBI) that the financial system is very strong. Having said that, there will always be, in any industry and this includes the financial sector as well, some kind of movement towards quality. As our depositors and borrowers become more sophisticated, I think they will be able to identify value and place their faith where that is deserved.

What are your budget expectations? Are you expecting any capital infusion?

BoB is adequately capitalized. In terms of budget, I believe the good part in the last six to eight months has been that the government has not waited for the budget to happen to make big announcements. There are a lot of positive things which have happened over the last six months and possibly we should be seeing more instances where the government progressively takes difficult decisions and announces reforms. One positive thing was the announcement of disinvestment in profit-making companies.

Do you have any monetization plan for your subsidiaries?

I do not believe that we have till date created enough value in the subsidiaries where monetization should be on the table. Having said that, there is enormous scope in creating that value. Once that value is created, monetization can be looked at.