But provisions hit US$ 8 billion in India
Venkat Raman
Bank of Baroda (New Zealand) Limited, the first Indian bank to establish its presence in 2010 has registered a robust performance for the year-ended March 31, 2018, with no provision made for Non-Performing Loans (NPL) in its books.
But the Bank had to make a loss provision of US$ 8 billion for its operations in India.
Robust Performance
Mayank Mehta, Executive Director of the Mumbai based Bank of Baroda, told Indian Newslink that the total assets of the wholly-owned New Zealand subsidiary as at the end of March 31, 2018 was about $116 million, of which loans and advances amounted to $86 million.
“The Bank recorded a net profit of $1.26 million during its 2017-2018 financial year. We are happy that Bank of Baroda (New Zealand) Limited is considered to be a ‘Well-Disciplined Bank’ by the Reserve Bank of New Zealand. We are poised to grow and roll out innovative products and services here,” he said.
Mr Mehta was speaking to us as the Board of Directors was meeting at the Bank’s Head Office in Mt Eden, considering some of the new services as Bank of Baroda (New Zealand) Limited marked its Eighth Anniversary on Monday, June 18, 2018.
“These eight years have been eventful for Bank of Baroda New Zealand Limited. We have capital adequacy of 80%, “more than comfortable” to manage our lending activities. However, our approach has been one of caution and strict control of market exposure, which is why, we have not provided for any non-performing assets,” he said.
Mobile Banking and Expansion
He later launched the Bank of Baroda Mobile Banking services at the Branch.
“We are digital savvy in New Zealand. All our transactions have been digitalised and we are planning to introduce many other innovative products,” he said but stopped short of giving details.
Bank of Baroda New Zealand Limited has three branches in the country, one each in Mt Eden (Auckland Central), Manukau (South Auckland) and Wellington.
Mr Mehta said that the bank adopted a cautionary stand in opening new branches.
“However, we will consider branch expansion as we move along,” he said.
NPL in India
While its comparatively modest operations in New Zealand are strong, NPL is a major headache for commercial banks in India, forcing the Reserve Bank of India (RBI) to issue new strictures. According to RBI figures, soured loans, which include non-performing, restructured or rolled-over loans, reached a record high of INR 9.5 trillion (US $148 billion) in the middle of 2017, before dipping slightly, prompting some relief among bankers that the worst was over.
State-run lenders, including Bank of Baroda account for the bulk of these loans.
Mr Mehta said that the total amount of his Bank’s NPL was about US$ 8 billion, which is about 12% of the gross assets of the bank or 5.47% of the net assets.
The Bank made a loan loss provision of about US$ 42 million covering 68% of its NPL for the year-ending March 2018.
Capital Adequacy Ratio
“While we are taking all the essential steps to recover overdue loans, we believe that we have provided adequately- about 68%. We have in place a number of measures,” he said.
RBI has been asking the lending banks to take recourse to One-Time-Settlement (OTS) plan with their NPL, which Mr Mehta said his Bank would apply as the last resort.
“As well as following the ‘normal’ process of recovery, we have initiated processes of debt recovery through the Debt Recovery Tribunal (DRT), National Company Law Tribunal (NCLT) and then OTS. As a bank we have a strong capital adequacy ratio of 12.87%, well above the prescribed limit of 9% of risk-weighted assets,” he said.
In fact, most banks in India have about 12% capital adequacy ratio.
Last MONTH, Ratings agency Fitch downgraded viability ratings of State Bank of India and Bank of Baroda by a notch to ‘bb+’ and ‘bb’ respectively citing the lenders’ weakened risk profile due to poor asset quality and the vulnerability of their capital buffers
to moderate shocks.
But Flitch said that Indian banks’ solid and resilient funding and liquidity positions remained intact and while deposit growth had slowed since demonetisation, depositor confidence remained high due to state banks’ government ownership.
“This is evident in banks’ retail deposit composition, which generally exceeds 80%,” it said.
Photo Caption:
- Mayank Mehta speaking to Indian Newslink on June 18, 2018
- Bank of Baroda (NZ) Limited Board of Directors at their meeting this morning
(From left) Anupam Srivastav (Managing Director), Ranjna Patel, Vijay Goel (Directors) Claudio Sandro Oberto (Chairman) and Sarangapani Janaki Raman (Secretary).
(Pictures for Indian Newslink by Ronny Kumaran)
