Bank of Baroda (BoB), India’s second-biggest bank by assets, which reported a huge net loss of Rs 3,230 crore in the January-March quarter, expects a turnaround in the current fiscal with higher recoveries and lower bad loans, backed by a no-soft-option approach scripted by CEO PS Jayakumar and the senior management. With a rise in provisions towards pension and other liabilities, and gross bad loans of Rs 40,500 crore in the fourth quarter, Jayakumar is looking to decentralise systems and compliances.
Brought in as part of the Centre’s banking reform agenda, Jayakumar, 53, worked with Citibank for 23 years, and later co-founded Value Budget Housing, before being appointed to the top role at BoB in October 2015 to address the NPA problem, and correct perception issues following charges of forex irregularities.
“We didn’t want to be overnight heroes but look at a long-term view and deal with the issue in a decisive way,” Jayakumar told HT during an hour-long meeting flanked by executive director Mayank Mehta and CFO VS Narang. “Tomorrow 60% PCR (provision coverage ratio) may not be good enough but we will look at it then. Next year, we have forecast a Rs 7,000-crore provision number, which will strictly not be required if the net accretion is lower.”
State-owned banks are busy cleaning up balance sheets marred by a rise in corporate defaults, with most of them reporting losses due to high provisions in the previous quarters. “The issue we wanted to make upfront was that as per requirements we have taken all the provisions. Some felt our coverage ratio was low. We took 60% as our PCR. Our capital adequacy ratio (CAR) was high so when we have enough capital we could take more conservative decision on our provisions,” Jayakumar said.
Seven months into his new job, the veteran banker says he has been pleasantly surprised by the reception from the bank management and its people. “Part of the time is due to the learning curve that I have to go through, meeting more people and clients and once the catch-up phase is over, hopefully it will be better. That’s the only complaint I have. The balance things I had bargained for like compensation as per industry etc…I am ok with that.”
Jayakumar had to face challenges from day one with allegations of Rs 6,100 crore of forex irregularities at the bank’s Ashok Vihar branch in Delhi. “We moved in to bring sales processing at branches to a more centralised system, successfully moved to a more alert monitoring structure, segregated front and back office that helped us look at fraud risks and compliance-related issues. That journey has started. Once done, there will be excellent amount of consistency in the businesses here and overseas. This can be done by March next year,” he said.