BoB to take leaf out of Vijaya Bank’s lending policy

Public-sector lender Bank of Baroda will be taking the leaf out of Bengaluru-headquartered erstwhile Vijaya Bank’s policy of focus on retail lending, after the tri-party merger of the three public sector banks.

From Monday, the public sector lenders – Vijaya Bank and Dena Bank – ceased to exist in the Indian banking space as they merged with BoB to create India’s second largest PSB in terms of customer base with exposure to over 120 million customers across the country.

“We will be completely focusing on the retail and MSME loan,” the bank’s general manager, Birendra Kumar said in a reply to question from DH.

As of date, the combined entity has an exposure worth Rs 2.1 lakh crore in the form of the retail loans – Rs 31,000 crore lesser than the Rs 2.41 lakh crore exposure to the corporate loans.

Vijaya Bank, with a retail and priority lending, before the merger, stood at Rs 64,211 crore (a whopping 48.41% of their loan portfolio), of which Rs 42,516 was exposed to retail lending. The bank’s emphasis on retail loans on helped it guide through the turbulent phase among the Indian PSBs as the bank was the best performing public sector lender. The bank’s net NPA ratio, as on December 2018, stood at 4.08%.

With the merger, the customers of erstwhile Dena Bank, will also get access to lending facilities, as the combined entity is having a capital adequacy ratio of 12.61% -- far above the 9% benchmark set by the Reserve Bank of India for bringing in any bank under the prompt corrective action (PCA) norms. The PCA norms restrict banks from giving large ticket loans to the borrowers.

The capital adequacy ratio, under the Basel III norms, is required to be at 8%. However, as per RBI norms, Indian scheduled commercial banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12%. Prior to the merger, Dena Bank’s capital adequacy ratio stood at 10.21% on the December end.

The merged bank, which will be having close to 9,500 branches and 85,000 employees, as of date, will be rationalising its branches in the coming quarters – by way of consolidation and branch closure. However, bank officials said that no employee would be laid of post-merger.