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00:00 Hello and welcome you're tuned into NDTV Profit. I am Harsh Saita.

00:04 We continue to focus in on numbers and a whole host of PSU banks coming out with numbers.

00:09 One of them being Bank of India. We have Mr. Rajneesh Karnataka to dissect those numbers with us

00:14 and of course to talk to us about FY25. Welcome to NDTV Profit, Sir.

00:19 So first off, I want to try and understand what's happening with margins. It's fallen

00:25 below the 3% mark. I want to understand what kind of margins can one expect going forward

00:30 and has the cost of deposit pressure now peaked in your view?

00:34 Yeah, as regard margins are concerned if you have noted our results. So the margins have

00:40 come down net interest margin on a global basis from 3.01 to 2.97 as on March 24. So the guidance

00:48 for it is at around 2.97, 2.95 to 2.97 for this financial year as regards the domestic margins.

00:55 So if you see domestic margin is at around 3.40 for March 24 and we give the guidance

01:01 at around 3.35 for this financial year. For the simple reason that liquidity is still tight. If

01:06 you see Friday's liquidity position, it is negative by 1.77 trillion and we expect that the liquidity

01:13 to remain tight up to July 2024 and by the end of this calendar year, we hope that the liquidity

01:20 pressure will ease. However, we are very much focused on our deposit franchise. Our cost of

01:24 deposit is only 4.51 and we are regularly pushing for that and our CASA ratio is also 43% and bulk

01:32 deposit is only 13% of our total domestic deposit, which means that 87% of our total deposit is from

01:39 the retail term deposits and CASA. So we are focusing on improvement of NIMS, protecting the

01:44 NIMS and this would be the guidance for March 25. Sure and so with regard to the increase in credit

01:52 cost, I know it comes from a low base, but how should one look at it first off and second, I

01:58 want to try and understand if there is a specific concern in a specific segment.

02:02 Yeah, yeah. So credit cost as you rightly said has gone up in the quarter 4,

02:07 Q4 it has gone up for Bank of India. The simple reason is that there has been some NPA in Q4,

02:12 especially with respect to MSME and agriculture. So 60 to 65% of the fresh pay pages which have

02:19 happened in the agriculture and MSME book, but this is an aberration. So the credit cost,

02:23 which has increased in the quarter is not there if you see the YOY numbers. YOY if you see our

02:28 credit cost, it was 0.79 as on March 23, it has come down a shade. Basically it is a flat level

02:34 at 0.78. So credit cost, we will be protecting the credit cost. In fact, it will improve.

02:40 It will be well below 0.78, should be at around 0.70 for March 25.

02:47 Understood. Okay. And therefore, you are expecting some bit of or some improvement,

02:55 if I can say in agri and MSME and therefore, what went wrong in Q4 versus what you are expecting in

03:02 FY25? So Q4, as I said, there were slippages in some MSME small accounts up to 25 lakhs

03:10 and some agri advances in some of these states. For agri actually it is a state-wide phenomenon

03:16 rather than pan India phenomena with some of the states there was more delinquency.

03:20 That was the issue, but I am sure that in Q1, the improvement will be there and the slippage,

03:26 whatever happened in Q4 of FY24, 24 would not be there in Q1 of FY25.

03:33 Understood. So margin pressure probably to sustain credit costs to actually get better

03:40 in FY25. Comes to my question where project finance is concerned. If this were to be

03:49 implemented first off, I understand fully that they are in draft, but if it were to be implemented

03:55 as is, what component of your book is project finance? If you could give us that break up.

04:02 And second piece is how well provided are you and therefore, how will it impact some of these

04:07 guidances which you have just given? Yeah, as regard to the RBI circular on

04:12 project funding, this 5th, 3rd of May circular of 2024. So we have done back of the envelope

04:20 calculation. Our risk department is working on it. We have to submit feedback also by 15th of June.

04:25 That we are in the process of doing. So on a ballpark number, what I can say is of the total

04:30 book, which is into infra and manufacturing, which will come under the project finance.

04:34 Around 20% of the book will come under this circular. This is our broad understanding.

04:40 Out of that 20%, there will be those accounts which we have, which are green funding where the

04:45 COD is yet to happen. And in some of the cases, maybe where the COD has been extended. So the

04:53 impact which will be coming according to us on the credits cost side, the credit cost may go up

04:57 by 10 basis point after 3 years at the peak of the 3rd year, which is March 27th. Keeping an

05:04 estimated credit growth of 10%. So credit cost increase will be only 10 basis point. As regard

05:09 to the impact on CT1, the broader number which is coming out for our book is around 20 to 22

05:14 basis points on the CT1 and it will not impact the CRAR because CT1 on this account will not

05:21 impact the CRAR. That is the broader thing. Definitely, since the credit cost will increase,

05:27 there will be increase in the cost for the bank, capital cost to the bank and it will get passed

05:32 on to the borrowers, maybe with some increase in rate of interest. Got it. How much will that rate

05:38 of interest go by so that I can put that out of the way? So at this moment, I will not be able to

05:42 give you any number because calculations are going on. Definitely, if there is increase in capital

05:47 cost, definitely there will be some increase in interest rate. I understand. I understand, sir.

05:52 And with regard to your growth guidance for FY25, what is that number like? Because while the 10

05:58 basis point credit cost increase may not really impact your numbers per se, but I want to try and

06:04 understand how this impacts growth for you. Growth will not be much impacted. If you see

06:10 our this year's growth which has happened, on the global side, we have grown our balance sheet to

06:16 13.23 trillion in which there was a growth of incremental growth of 1.68 trillion with a growth

06:23 of 11%. On the advances side, we grew by around 13% with 68,000 crores of advances. On the deposit

06:29 side, we have grown by around 11% with an incremental increase in deposit by 68%. For

06:36 the guidance sake, we are giving a growth of around 12 to 13% on the deposit side, 13 to 14%

06:41 on the advances side, and overall 12% growth in the global business side for FY25. So this circular

06:48 per se will not impact much because the book is very small. As I said that the impact will be

06:53 hardly 20% of the infra book and our infra book and this industrial finance group where the project

07:03 funding is there is not even 1 trillion. Got it. Okay. Understood. Fine. I want to also try and

07:12 get in your perspective with regard to ROAs now. Where should ROAs head from here? Is there scope

07:18 for further expansion of ROAs? And what's the expectation going forward like?

07:24 Yeah, definitely we will improve our ROAs. If you see our balance sheet and

07:29 FY23, our ROA was 0.49, which we have improved to 0.70 in March 24. It will get further improved.

07:37 We are taking a lot of measures to do that. If you see the balance sheet again, as on YOY,

07:42 our net interest income has increased from 20,000 crores to 28,000 crores, which is an increase of

07:47 14%. Similarly, our other income has also increased on a year on year basis, barring that one off item

07:55 which was there in March 23 of around 1600 crores. If you net it off, then also our non-interest

08:01 income has gone up. Then on a YOY basis, obviously, I said it has gone up. Operating profit has also

08:08 gone up by 5% point. However, if you net off that one off item in March 23 of 1600 crores,

08:15 operating profit growth on Q1Q basis and also on YOY basis has gone up. In fact, on YOY basis,

08:21 it is not 5% if you net that item off, it is actually 11% increase in the operating income.

08:27 So non-interest income, we are trying to improve. Recoveries, we are trying to do. This year,

08:31 we had a recovery of around 7,500 crores, which includes pure cash recovery, cash recovery plus

08:37 upgradation plus recovery from return of accounts. In fact, recovery this year was more than the

08:42 total fresh slippages which happened in the bank. All in all, with all these measures,

08:46 I am very sure that the ROA will be much better than the 0.70 which we have shown in this financial

08:53 year. Would you therefore exit FY25 with 1% plus? Is that the aspiration?

08:59 So 1% is always an aspiration, but I don't think that kind of optimistic number will be there,

09:06 but definitely we will be working for that. Maybe you can take a guidance at 0.90% as of now.

09:12 Fair. And this is exit FY25. Exactly.

09:15 Got it. And with regard to recoveries, I want to understand the pipeline over the next two to three

09:20 years. What's the pipeline like and how do you expect FY25 to pan out versus the 7,000 odd crore

09:28 in FY24? So if you see our book, our book is around gross NPA of around 29,000 crores and net

09:35 NPA of around 7,000 crores and a gross NPA number of 4.98% and a net NPA of 1.20%. So as far as

09:44 recovery is concerned for FY25 and FY26, we will be trying to maintain our numbers. So what the

09:50 guidance we have given this time, we have recovered 1x of the fresh slippages which have happened

09:54 near to 1x. So the guidance which we have given to our field is whatever the fresh slippages

09:59 happened this year. In this financial year, we have to recover at least two times of that fresh

10:03 slippages. So definitely we will be working on our entire NPA book, whether it is on the retail,

10:08 MSME, agriculture side or the corporate side, so that whatever the recovery happens, it should be

10:13 much better than the recovery which we did in FY24. Understood. Okay. Mr. Karnadak, it's been

10:19 a pleasure speaking with you and getting all of that perspective. We'll obviously continue to

10:23 monitor Bank of India and we'll call you very, very soon for another chat. It's good speaking

10:29 with you. Completely out of time on this one as well. Thank you so much for staying tuned with

10:35 that. Completely out of time on this edition of the show. More on NDTV Profit on the other side.

10:41 Stay tuned.

Bank Of India's Q4 Report Card | NDTV Profit

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