Bank of Baroda Rules Out Immediate Deposit Rate Hike Targets Growth in Retail Agriculture and MSME Loans

Bank of Baroda Rules Out Immediate Deposit Rate Hike Targets Growth in Retail Agriculture and MSME Loans

Bank of Baroda, one of India’s leading public sector banks, does not anticipate a need to increase deposit rates in the near term, citing improved liquidity and alternative fundraising options, according to its Managing Director and CEO, Debadatta Chand. The bank aims to expand its focus on retail, agriculture, and MSME (RAM) loans, aspiring to increase the share of this segment to 65% within three to five years, up from its current 58%.

Bank’s Strategy Amid Liquidity and Competition

With the liquidity situation improving since June and a shift in stance by the Reserve Bank of India, Chand expects a seasonal influx of cash back into the system during the busy season, which will further support deposit growth. "Given our capacity to source funds from alternate avenues, we do not foresee pressure to raise deposit rates in the immediate future," he said, confident that the bank’s liquidity stance can sustain its growth strategy.

Focus on RAM Loan Segment

As of March 2024, Bank of Baroda’s RAM (Retail, Agriculture, MSME) segment accounted for 58.2% of its total loan portfolio. Chand noted that the bank has set a three- to five-year goal to increase RAM segment exposure to 65% to achieve a more balanced portfolio across these priority areas.

Projected Stability in Net Interest Margin

With a potential interest rate reversal on the horizon, Bank of Baroda has set its Net Interest Margin (NIM) guidance at 3.15%, plus or minus five basis points. In the second quarter, NIM stood at 3.10%, slightly up from 3.07%. Chand remains optimistic that improved global liquidity conditions will alleviate deposit costs, helping the bank maintain its full-year NIM target.

GNPA Reduction Efforts on Track

Bank of Baroda has already reduced its Gross Non-Performing Assets (GNPA) to 2.5% and is working on further lowering this figure. Chand outlined recovery and containment goals, targeting Rs 12,000 crore in recoveries and containing slippages at around Rs 9,000–10,000 crore. He highlighted the bank's recent success, with fresh slippages at Rs 2,700 crore for two consecutive quarters, and underscored the goal of capping full-year slippages below Rs 10,000 crore to further reduce the GNPA rate.

With plans to expand its RAM portfolio, manage NIM effectively, and bring GNPA down through targeted recoveries, Bank of Baroda aims to sustain its growth trajectory while ensuring financial stability.