Bank of Baroda's Sanjiv Chadha expects interest rate cuts by end of FY24

Public sector bank, Bank of Baroda's managing director and CEO Sanjiv Chadha expects interest rate cuts by the end of FY24.

"We possibly have reached the end of the interest rate cycle and the sequence on interest rate increases that we saw. As of now, we are pencilling in the possibility of rate cuts towards the end of the financial year," he said in an interview with Business Today post the bank's Q4 results.

Chadha also stated that the bank, which has around Rs 1,300 crore exposure in crisis-hit airline Go First, anticipates issues in advance and makes provisions if needed. "We are fairly assured as far as our loan is concerned," he said.

"The bank has a policy of being very conservative when it comes to provisioning, which is why our credit costs are low, because we try to anticipate issues that might arise in the future. Taking that conservative view point, we have made a Rs 500 crore provision on this account (Go First)," he stated.

It must be noted that the state-run lender's credit cost, the projected quantum of potential losses on total loans, was at 0.14 per cent in the January-March quarter, down from 0.37 per cent the previous quarter and 2.69 per cent a year ago.

The gross non-performing assets (NPA) of the Bank reduced by 32 per cent YoY to Rs 36,764 crore in the January-March quarter and gross NPA ratio improved to 3.79 per cent in the same quarter from 6.61 per cent in Q4FY22.

Earlier, Chadha had also said that the bank does not foresee any challenges in adhering to the central bank's proposed loan-loss mechanism given its improved asset quality ratios and will be able to maintain credit costs.

"I think we are very well protected," said Sanjiv Chadha, managing director and chief executive officer.

"Our normalised credit cost is below 1 per cent and we should be able to take care of any ECL (expected credit loss) provisions within this so that our earnings trajectory is not disturbed", he stated, as per Reuters.

In January, the Reserve Bank of India (RBI) released a discussion paper suggesting that banks switch to the ECL method, in which lenders assess the probability of default upfront and provision accordingly, rather than after a default occurs, as is the current norm.

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