Q&A BoB aims $3 bn in FCNR (B) deposits, MD & CEO Debadatta Chand tells Subrata Panda & Aathira Varier 4Bank of Baroda aims $3 bn in FCNR (B) deposits: MD & CEO Q&A Bank of Baroda expects its return on assets (RoA) to remain above 1 per cent in each of the remaining three quarters of FY27, even as the $600 million settlement related to overseas litigation weighs on its full-year profitability. The public-sector lender expects near-normal profitability for the full year and could upsize its credit-growth guidance after the second quarter (Q2) if geopolitical and monsoon-related risks moderate.

Debadatta Chand, managing director and chief executive officer, Bank of Baroda, speaks to Subrata Panda and Aathira Varier on the growth outlook, margins, acquisition financing, and overseas fundraising plans. Edited excerpts: The $600 million settlement has impacted net profit, RoA, and return on equity. Would you say the episode is now behind you?

■ Absolutely. The cases in Abu Dhabi, and England and Wales have been settled, with the maximum amount crystallised at

$600 million. The underlying cause pertains to the overseas jurisdiction, and the settlement and payments have also been made by the overseas jurisdiction, insulating the domestic books from any impact.

By when do you think the bank can recover from the impact that we have seen this quarter?

■ The June business numbers have been strong, reflecting the strength of the books and the franchise. All segments—agriculture, retail, micro, small and medium enterprises, and corporate — are strongly growing. I am also encouraged by deposit inflows, with domestic deposits growing 14.7 per cent. As for operating profits, things are as usual, but the settlement has impacted net profit and, consequently, RoA.

Excluding this impact, net profit and RoA are in line with the growth rates seen in earlier quarters. We expect RoA in Q2, Q3 and Q4 to remain above 1 per cent.

This is a oneoff impact although it will weigh on full-year RoA. We still expect near-normal profitability for the full year because a couple of oneoff upsides remain, including the initial public offering (IPO) of an exchange house in which the bank is a selling shareholder. We will give the full-year RoA guidance next quarter after assessing the geopolitical situation and the progress of the monsoon. All other guidance remains unchanged.

Are there are any governancerelated concerns regarding the bank's international operations?

■ This was a legacy case. In 2021, the international books were degrowing and their contribution to global profit was negative.

Since then, the international books have grown from 10-11 per cent of the overall books to 16-17 per cent, while its profit contribution is now in excess of 16-17 per cent of global profits. The bank has strengthened the framework for international operations, including underwriting quality, governance and compliance This has helped create new, aligned books, which support our ambition to grow globally.

«EXPECT ROA IN Q2, Q3 AND Q4 TO REMAIN ABOVE 1%.

THIS IS A ONEOFF IMPACT ALTHOUGH IT WILL WEIGH ON FULL-YEAR ROA » Debadatta Chand, Bank of Baroda MD & CEO second-order effects, such as supply-chain disruption, the outlook could change. We will be in a better position to assess this after Q2. Despite continuously outperforming our credit-growth guidance, we remain cautious because. We could upsize the guidance after Q2 if these risks moderate or do not impact the economy.

You mentioned geopolitical uncertainty and the El Niño situation. Where do you see growth coming from over the next few quarters, and are you concerned it could taper off?

■ As of today, we do not see any impact from geopolitical developments or the monsoon. However, if these overhangs persist and lead to What does the corporate pipeline look like? What is your plan on acquisition financing?

■ Our pipeline, comprising sanctioned but undisbursed loans and proposals under processing, is ₹50,000 crore-60,000 crore against the usual ₹60,000 crore-70,000 crore. In March, we try to optimise sanctions and disbursements. On acquisition financing, we will first build the skills to understand the market before going solo. Given our global operations, we have the necessary understanding and skills to do merger-and-acquisition deals on a standalone basis, but currently, we are evaluating deals with partners.

Your net interest margins (NIMs) have contracted a bit. Where do you see NIMs, going forward?

■ NIMs are a function of interest rates, and banks are seeing a squeeze. Net interest income grew 9.5 per cent, while average advances rose at a higher pace, with absolute advances growthat 17.45 per cent, putting pressure on NIMs. We had guided for NIMs of 2.75-2.95 per cent last quarter, accounting for this impact. We expect NIMs to sustain at the current level in Q2 and, thereafter, with asset-liability repricing, move towards 2.95 per cent.

How much are you targeting to mobilise through the RBI's concessional swap window?

■ Our target was around $2 billion from Foreign Currency NonResident (Bank), $1 billion from external commercial borrowing (ECB) and $1 billion from overseas foreign currency borrowing (OFCB). Currently, OFCB and ECB can wait. Although we are in the market, we are looking for the right pricing to close those transactions. I said we were targeting $4 billion-5 billion, with the additional $1 billion coming from FCNR (B), as we are not going to upsize the other two channels.

The $600 billion-700 million mobilised via FCNR (B) so far is broadbased, given our international operations. The flows have been geographically well distributed. Even in 2013, flows were significant towards the last month, and we expect flows to be significant in August and September. We will then get a clearer picture of the geographical spread of the inflows. As of today, the flows are well diversified across our operations globally.

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