Full relaunch of the investment cycle could be in a few months: Bank of Baroda

Bank of Baroda was the first of the nationalized banks to have completed the merger of two smaller banks with itself. The bank’s experience in the merger has helped other consolidating public banks to develop their strategy. In an interview with TOI, Managing Director and CEO Sanjiv Chadha talks about the way to go …
How did the second quarter go in terms of activity?
Credit growth – the investment cycle in particular – has experienced challenges in recent years. Even today, the capacity utilization is around 70%, and it’s only when it hits 80% that you get a series of serious investments. We are seeing investments in brownfield projects in companies that have changed ownership. We’re seeing great capabilities in areas like renewable energy. We also have a large investment in electric vehicles. We are seeing progress in moving beyond green shoots. For this to gain momentum and become a full-fledged relaunch of the investment cycle, we could be in a few months.
On the asset quality side, do you see more cleaning happening?
The business credit cycle has improved overall, as we have seen in recent quarters. The slippage of companies has decreased considerably compared to what has been the case in previous quarters. The challenges in retail and MSMEs have increased during the pandemic. Overall, in terms of credit quality for banks, I think we should see improvement despite the challenges that we saw with the second wave.
When do you think the RBI will start to normalize its monetary policy?
I think there are two elements in relaunching monetary policy. One was in terms of rates and the other in terms of liquidity. So, you would expect the liquidity part to start normalizing first. The evolution of the rate cycle is expected in a few quarters. The distortions in risk pricing due to excess liquidity should be corrected and we should start to see credit risk the way it would normally be.
You have launched a new BoB world digital platform. What does this mean for customers?
Covid has brought a broad and deep transformation and nearly double the number of customers visiting the branch now use the app. So rather than being an auxiliary to the bank, it will be the bank and the other parts of the bank will become an auxiliary. The idea was to enable anything that can be done in the branch within the app. Therefore, we looked at the design, branding and positioning of the app. BoB world will be the main interface at the center of the bank.
How much effort has been put into the back end?
The bank has made investments and has been identified as the best technology bank of 2021 by the IBA. The integration (of Dena and Vijaya Bank) on a common platform after the merger gave us a solid basis to build this strategy.
How scalable is the core digital banking platform?
Today we have 13 million customers using bob World which is a very robust and scalable platform. For the future, cloud computing will be a very important element as it will help to scale not only in terms of users but also multiple fintech partners on the platform.
Will Bob World be a great app like Yono from SBI and will you integrate the branches?
The way the app is positioned for you to save, borrow, invest and pay. All four capabilities are in the app and are scaled daily. In addition to the regular transaction, we have things like booking airline tickets and price comparisons between merchants to bring the cheapest proposition to customers. The other important element is the benefit program which depends on the category you choose based on the balance you want to maintain.
How do you see yourself as a bank attracting millennials over 100 years?
The marketing campaign is aimed squarely at millennials. Design is something they will find appealing. They can open the account fully online through the KYC video and the account will get benefits including Amzon Prime.
Will you be part of the account aggregation platform?
It’s a conversation we still have. But having such a platform gives you very powerful leverage to make sure you can take advantage of certain commitments.
Will BoB World be limited to retail?
We’re starting with retail with around 95% of all retail services now available on mobile. The next logical step is to shape it for other segments.
On the business side, are there any gaps in digital banking that you are going to fill?
The main banking channel for banks is mobile. Not too far away, the mobile phone is likely to become an important item in particular for MSMEs and this is what we will be targeting next in Bob World.
How do you plan to reach unbanked areas and advance the financial inclusion agenda?
It is a great pride for us that although we have a 6-7% share in the banking sector. Our share in Jan Dhan Yojana is 15%. So some of the service delivery will be digital, but this may not be relevant for people on the other side of the digital divide. We have a very aggressive program to increase our commercial correspondent and increase their number from two for each branch to five BCs for each bank branch we have. We want to double the outlets in British Columbia to 50,000.
Would you hire people?
The merger has resulted in efficiency gains, but we have not laid off any staff. The redeployment will help fill marketing and other vacancies. We will continue to recruit specialists. For example, we are now recruiting asset relations managers. We can also recruit for specific skills such as digital banking. But there may not be much increase in membership.

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