Good morning, everyone. Good morning, and welcome to the analyst meet for Bank of Baroda's F inancial results for the Quarter and year ended March 31, 2025. Thank you all so much for joining us. We'll start proceedings with a brief introduction. We have with us today our MD and CEO, Sri Debadatta Chand, and he's joined by the bank's Executive Directors and our Chief Financial Officer, Chand sir. I would request you to start proceedings.
Good morning to all of you. Just to introduce the management team, I'm D. Chand. I'm the MD and CEO of Bank of Baroda. To my right, Mr. Lalit Tyagi. He's the Executive Director. He looks after corporate credit, international banking, and treasury, more importantly. To his further right, Mr. Lalit Singh. He's the Executive Director, looking after the MSME, the recovery, and also the HR function of the bank. To my left, Mr. Sanjay Mudaliar. He's the Executive Director, looking after the IT and the entire IT part of the bank, and also on the retail asset of the bank. To further left, Madam Beena Vaheed. She's the Executive Director, looking after all platform function, compliance, and control, and also the retail liability. To the further left, Mr. Manoj Chayani. He's the CFO of the bank. With this, there is a presentation, right?
Thank you, sir. Yes, would request Chayani sir to please come over. We've got a short presentation with the highlights of the quarter and year gone by. Can we have the PPT, please?
Respected MD sir, Executive Directors, and esteemed analyst friends, good morning to all of you. It gives me immense pleasure to welcome you all for showing interest in Bank of Baroda. After such a long time, we are holding this analyst meet physically. I will be presenting a few highlights of financial year 2024-2025, quarter 4-2025. As far as the financial results are concerned, 2024-2025 is a very, very robust and stable year for Bank of Baroda, with our total global business crossing INR 27 trillion. In fact, during this period also, as we will move on the slides, I will explain, we have posted highest-ever profit on console basis as well as on the standalone basis. Let me now go through the details of the presentation.
As you can see, from the asset side, we have given a guidance of growth of 11%-13%, and our asset has grown by 12.8%. The fact I would like to bring to your kind notice is that the domestic advances have grown by 13.7%. If I go to the segment-wise, the retail is going good with a robust growth of 19.4%. Agriculture and MSME have shown a very potential growth of 14.2%, and corporate is at 8.6%. In the retail also, each and every segment has shown a very strong growth, with education growing at around 16%, home loan 17%, mortgage 19%, and auto loan at 20%. As we earlier said, we are moderating the growth in case of our personal loan book, which used to be 100%. Now we have moderated it to 21%, and we continue to have the same growth in future also.
Coming to the deposit side, our guidance was 9%-11% growth, and happy to say that the total global deposit has grown by 10.3%, with international 15.8% and domestic 9.3%. Here are two aspects. I would like you to note that our CASA growth is 6.4% Y&Y, which is a benchmark in itself among all the public sector, the PSBs, and some of the private sector also. Similarly, our CD ratio is maintained at a stable rate of 83.59%, and domestic CASA, as we always said, we'll be maintaining at 40%, and it is at 39.97%. Coming to the quarterly profitability, operating profit we have posted 8,132. Profit after tax for the Q4 is INR 5,048 crore. Please note that during the whole financial year, we have posted a profit of INR 5,000 crore twice in the year.
Return on asset is consistent, and as we said, for the last 11 quarters, we are posting return on asset more than 1%, and it is 1.16% as of 31 March. Similarly, return on equity is healthy, somewhere around 18%. Yearly profitability, if I look at it, PAT we have posted all-time high of INR 19,581, and here the console PAT we have exceeded INR 20,700 to be very precise. As we said, operating profit INR 32,435, which was earlier INR 30,900. Similarly, return on asset we are maintaining more than 1, and return on equity at 17%. Our margin of yield on advances is a little bit down from 8.53% to 8.39%, with the obvious reason of easing out of the interest, and cost of the deposit is at a little bit on a higher scale.
As a result, our quarterly NIM has declined from 2.94% to 2.86%, a few basis points because of the repo cut and a few basis points because of your day count for the March quarter. As we always said, we will be maintaining the NIM more than 3%. Our closing NIM as of 31 March is 3.02%. This slide, I will take a little time to explain to you how we have generated value for the shareholders. As you can see, for the last five years, there is a consistent increase in the book value for the share, which was 106, which has now gone up to 223, which is a substantial increase in the value per share.
Similarly, earning per share has gone up to INR 38, and you'll be happy to note that the board has recommended for a dividend of 8.35% with a face value of INR 2 for the financial year 2024-2025, subject to approval by the competent authorities. We enjoy a government percentage of around 64%. Asset quality is a key for us, and we never compromise on the asset quality, with gross NPA trending down from 2.92% to 2.26%. Net NPA, similarly, is trending down from 0.68% to 0.58%. Provision coverage ratio is 93.29%, which is healthy in itself. Similarly, if we look at the slippage ratio, slippage ratio is also trending down from 1.12% to 1. As we said, our slippage ratio will never exceed for financial year 2025.
If I take the total slippage ratio, it has gone down from 0.99% to 0.78%, and the slippage ratio, our guidance was 1-1.15%, and with which we are well within that limit. Credit cost, similarly, we have given a guidance of 0.75%. However, we are closing our credit cost at 0.47%. SMA book is pretty much within the control of 0.33%, and our collection efficiency is at 98.5%. The bank enjoys a strong capital base of INR 17.19 billion, with tier one ranging to 14.79%, and also we are having a healthy LCR of 123%. This is the highlight for 2024-2025. Now I will request MD sir to give his welcome remarks. Thank you, sir.
Thanks, Mr. Chayani. As the presentation captures everything with regard to the numbers for the bank, let me make a couple of qualitative comments with service to the performance. One basic business model for the bank till today has been the consistency. If we look at our performance for the last 10, 12, 13 quarters, whether it is a top-line number, whether it is a bottom-line number, one of the basic themes which the bank is working on is the performance consistency. More importantly, the stability aspect of the numbers and also backing of everything within the bank to make it fundamentally strong. Just a couple of numbers, which again, in terms of the domestic advance growth, we had a growth of 13.7%, which is definitely a very strong number for the full year. At the same time, the global is almost at 13%.
On the deposit side, the domestic deposit at 9.3% and the global at 10.3%. In terms of guidance that we had given earlier, both the deposit and advances, deposit we said earlier will grow at 9-11% and advances at 11-13%. We have come true to the guidance. Likely on the advances, we are at the upper band or exceeded as far as the domestic advance is concerned. Any other guidance we had given, whether it is a slippage ratio, credit cost, ROA, and more importantly, the marginal talk slightly more on the margin side. We have come true to the guidance all along whenever we give a guidance. When last quarter, I revised the NIM guidance by 5 bps , and the market reacted, obviously so. The idea was to come true on the guidance.
If we look at March 2025, the overall NIM is at 3.02. I'll come slightly more discussing on the NIM part of it. As I said, fundamentally, the bank stock is a strong one. One slide which we included this time, the value to the shareholder. If you look at the book value, FY 2023, it was at 148.8. The book value as on FY 2025 is 223. So almost INR 75 of book value we have added in two years' time. It is almost at 148. You look at almost 50% increase vis-à-vis the book value. It was in FY 2023. The dividend has been very consistent, possibly one of the highest dividend yields vis-à-vis any other public sector banks for the matter. The EPS trajectory is also very consistent.
The point that I'm driving here is that one of the key themes the banks look at to make the bank fundamentally strong. While consistency, stability is important, contour of the bank's business model. The idea is to make the bank fundamentally strong. I think that's a value the shareholder, I mean, have realized and possibly need to realize on that. On the operating performance side, yes, the NIA growth is a muted growth. It wished to grow higher, but the underlying market condition, particularly on the liability, that is what we revised the margin guidance in December, that the cost structure on the deposit is still was elevated, impacting the Q4. If you look at the liability, and Mr. CFO also said that the CASA growth, possibly one of the benchmark vis-à-vis the industry at 5.7% growth.
I do not know how many banks are giving the data of saving and current separately. Our saving growth is almost at 5%. That is a retail saving that we are talking about, right? Secondly, earlier also, multiple times I said earlier, the dependency on the bulk, we want to reduce it. I just give a data point, the outstanding bulk deposit as a percentage of total deposit. I mean, it was somewhere at 8% in FY 2022. It went up to almost 16% in FY 2023. As on June 2023, it went up to 20%. As on today, it is almost one year, nine months, we are still at 20%. We do not want the expansion of the balance sheet by raising bulk deposit.
That is a number already. If you can compute that part of the numbers given in the analyst presentation, you can make it out. The operating profit growth has been almost at 4.75%. That is because the non-interest income has been strong this year. Just to give a sustainability of the non-interest income, I'd say there are two items which help us. One is a treasury income, and another is a recovery out of TW accounts. The treasury income has been better this year as compared to last year, almost INR 600 crore. Going by the current market condition on the bond market or the rate side, I believe this year also is going to be a good year for treasury. Similarly, on the recovery out of the TW, our normal run rate earlier also we said is almost like INR 750-800 crore.
Every year we see there is a one-up coming out of an NCLT resolution or some other account. Last year also we had one-up. FY 2023-2024 also we had one-up. With a run rate of around INR 750-800 crore, I think again this year is going to be a one-up, putting our recovery almost at the same level like last year. Cost to income, I think at below 48% is one of the best in terms of the way we look into the market and cost to income over the banks. The net profit growth has been 10%. Although quarter to quarter, the growth has been 3%. As I said, the business model is a consistent and stable business model. When my top line is growing almost 12%-13%, I think growing 10% net profit is also a good performance as far as the bank is concerned.
On the composition of asset, the retail continued to grow at 20%. One number that you would notice this time, last time I said that we want to upsize the growth in MSME and agri. The agri and MSME growth has been almost 14.2%, which is almost 300-350 basis points higher than that of last year. I earlier also said we corporate we want to grow at 10%, and this year it is 8.6%. I hope liquidity back into the system now. We can grow at 10% for this year too. One of the numbers which again should invite when I talk about the fundamental strength of the bank is the percentage of CASA ratio.
We are at 39.97, and I think in the top league of the banking sector in terms of both public-private together, 39.97 is one of a very good number as far as the CASA percentage. Although market was very tight, there is a preference change that happened vis-à-vis the deposit or vis-à-vis the capital market. I think the bank did well in terms of maintaining the CASA at 39.97%. As I said, we want to we focused more on the retail saving and retail term. We did it through multiple innovative products, better services, many marketing campaign. As you know that we last year got Mr. Sachin Tendulkar as the brand ambassador for us. Coming out some curated products vis-à-vis the deposit.
I think because of our innovation in the space of the deposit market, the bank is able to do good in both retail saving and also on the retail term deposit. Two point I would like to again slightly possibly all of you would like to know that is what the coverage that I would see after announcing the financial result vis-à-vis the market reaction. One is on the margin front, another second is on the slippage front. When we December, we announced that we are going to revise the margin guidance, precisely looking at the Q4 number that was likely when we saw it in December. Precisely for that reason, we reduced the guidance by 5 basis points. Earlier, the guidance was 3.10 ± 5 bp s. We revised that to 3.05 ± 5 bp s.
At that time, the market reacted also with the change guidance, but the idea was that we would come true on the guidance. That precisely Q4 NIM is slightly lower than that of December Q3, and that was obviously it was known and for which the guidance was revised at that point of time. Having revised the guidance, the full year NIM is at 3.02. Here there are two factors to be considered while looking at this number of 3.02. At 3.02, I do run a large international book where the margin is less. My domestic NIM is 3.18. I think that's compared with the best in the market as far as the domestic NIM, and I'm talking about large PSU for the matter. At global NIM of 3.02, also within the large public sector peers, we are the number two.
We are one bank for a full year having a NIM in excess of 3. Again, our business composition is a 16-17% international book, and that's why if I only compare the domestic, possibly would be one of the highest. Margin when reduction happens quarter to quarter, we as a bank, when we say we carry rate-sensitive assets and liability and we do active ALM management, I mean, my NIM has to react to the market condition. Suppose the market, you know, there is an elevated cost structure and my NIM is not reacting, that means something either I am going for a risky asset to compensate my NIM. That's not the theme the bank works on. We keep underwriting quality of the book as one of the key foremost things while trying to drive on the business.
My request to all of you, please look at the absolute number of 3.02, not the cut between December, March, vis-à-vis December. At 3.02 also, it's a very active, I mean, what I mean to say, it's a very strong number because if you compare the market, yes, Q4 there is a cut vis-à-vis Q3, and that was anticipated beforehand. Having said so, as on today, how do I look again at the NIM guidance for full year 2025-2026? We said we are not going to give a full year guidance now, the reason being the market is at a very inflection point. Why? The repo rate already has been cut by 50 basis points. The cut of the repo rate within this Q4 itself is almost 3 basis points and going to be for the full year would be much higher.
Similarly, the liquidity scenario that was prevailing in Q4 has changed in Q1. This quarter is really a quarter we need to watch out with regard to the NIM trajectory. As you know, the deposit has a lag time. We have seen the wholesale deposit, we almost run a book of INR 225,000 of the wholesale deposit. The repricing of this deposit started at a much lower level, around 30-40 basis points lower as on today. If you track the certificate of deposit market, you can very well know that the wholesale deposit, the rates have gone down. On the retail deposit front, we have reduced the peak rate by almost 15-20 basis points. Possibly with the further, I mean, moderation happening on the liquidity and the rate stance, possibly these rates again would be reduced further.
As you know, on the floating rate advances, the impact comes immediately. Deposit impacts slightly take a lag effect. Q1 would be a quarter to watch out. I think the normalization of this, I mean, catch-up in terms of the reduction in income and the reduction in the cost of deposit could slightly take a longer time and possibly would catch up somewhere in the latter part of Q2 or Q3. We are expecting a much better NIM somewhere in maybe to some extent in Q2, but Q3, Q2, Q4 would be definitely much better. My sense as on today, although I'm not giving a full year guidance, my sense as on today that on a full year basis, all the banks including us would be able to maintain the NIM margin that we achieved in the previous year, at least.
Immediate Q1 would be slightly a challenge because, I mean, in our kind of market scenario, it's an inflection point in terms of the rate stance change between Q1 over Q4, the liquidity changing between Q1 over Q4. There can be some kind of a pressure still continuing. We'll need to see, need to watch it out and then possibly decide on a full year guidance. On the slippage side, asset quality, let me tell again on multiple times that we have one of the best asset quality ever in the history of the bank for the last 13 years. The number of GNPA and Net NPA you are looking at, I'll come to the slippage data data wise, point wise. The slippage that we are looking at, the GNPA and Net NPA are the best in 13 years.
What is good part of Bank of Baroda story here is that consistently for the last 12 quarters, the trending has been unidirectionally downward. I'm again repeating, unidirectionally downward in the sense there is no up and down in between, consistently it is trending downward. That's a story that is very strong, that the asset quality of the bank as on date is one of the best in 13 years, point one. There are two other data, it is there in the analyst presentation, you can have a look. The slippage that we have this year, full year, I'll come to the quarter also, the slippage for the full year is lower than the slippage that of last year. The recovery that we have for the full year is higher than the recovery that of last year.
Within this year itself, 2025, the recovery is higher than that of slippage. Again, I repeat three statement that I'm making. The slippage of this year is lower than that of the slippage last year. The recovery of this year is higher than the recovery that of last year. Within the same year, that means 2024-2025, the recovery is higher than that of the slippage. I'm excluding the write-off that happens in the book. I'm only talking about the NPA recovery and the TW recovery that the data is here in terms of moment of NPA. Even if considering the Q4 only, which some of you are the market reacted, the Q4 slippage is INR 2,850 crore odd. Q4 2025. The Q4 2024 recovery slippage is almost at the same level, INR 2,850 crore odd, I mean, it's flat. I'm comparing with the Q4 of last year.
Between the Q4 and Q3, yes, there is a INR 300 crore increase between INR 2,500 crore - INR 2,800 crore. Again, look at another data therein, I'm coming to the quarter comparison, the recovery is also higher than more than INR 300 crore on the same head as far as recovery of this quarter vis-à-vis the recovery of last quarter. Another data point I'll give you, the collection efficiency, which again talks about the quality of the book the bank runs. The collection efficiency March 2024 was 98. And March 2025 is 98.5, obviously excluding agriculture, that is a data that we provide to all of you. In terms of the structure of the NPA, it is one of the best, what you can say, quarter we had and full year we had.
There is absolutely no concern with regard to any incipient or any inherent, I mean, what you can say, slippage or anything stress building in the book, absolutely no doubt should be on that. Going forward also, and you could have seen that we gave two guidances. One is a slippage ratio, another is with regard to the credit cost. Our guidance for the slippage was 1-1.25% and credit cost was less than 0.75%. Normally you factor in building in a model form, right? Consistently for all four quarters, our numbers are way, way, way below this guidance. Absolutely there should not be any doubt with regard to the asset quality of the bank. Yes, there are a couple of pockets, like suppose you said on MSME and retail, there is some incremental INR 300 crore, INR 400 crore, or INR 500 crore of increase.
Look at corporate, there is a INR 2,000 crore fall also on the slippage. You can't have a book-wise, you need to look at the book as a whole rather than a book-wise and then possibly take a call on that. With this, I think we had one of the best quarters in terms of both top line, bottom line, and also on the asset quality. These are the three key building blocks or pillars I think the bank runs on. With this, again, thank you all of you. This is possibly we are doing a physical analyst meet after almost two years, more than two years. Thank you for sparing your time on a very eventful morning, rather, very, very eventful morning. I think all question answer, the management would be here, including me and the IDs to clarify all your doubts. Thank you very much. Now over.
Thank you, sir. I will now open it up for questions. If you have a question, please raise your hand and we'll have a mic sent to you. Just two requests, please introduce yourself before you ask your question and please limit it to two questions only. We have a couple of, yeah, please give it to the lady. We have a couple of, we have a few analysts who have joined us virtually, and at the end of the session, we will try and take a few questions from online. For the online participants, you may either type your question in the Q&A box or you can raise your hand and we will come to you. Thank you. Yes, ma'am.
Good morning. I have a couple of questions. Firstly, on the write-off, which sectors do the write-offs relate to? Of course, they were all appear to be very small loans, but which sectors? Was it MSME? Was it personal loans? Which are the main sectors? Is that the reason why credit cost also would have gone up quarter on quarter? That was my first question.
Sure. On the write-off, actually, there is a write-off policy of the bank. It's typically on the write-off KT, there are again recovery happening and there are flash KT you are adding therein. The write-off normally doesn't happen on a segment of advances. It goes to all segments and mostly into large corporate where already 100% provided. There is an aging over there. It happens also on small business, but our write-off is not specific to any segment, whether it is MSME or retail or corporate. It's across all the segment.
This year, if I look at INR 8,500 crore of write-off, mostly it has gone to the large accounts rather than small accounts on that. These are sufficiently aged. I mean, there is a sufficient time of this account getting through and also 100% provided since law. Anything else you want to add?
No, sir.
Okay, thank you.
Basically, the quarter on quarter increase in credit cost is not attributed to write-offs. It is just the normal provisioning.
It is a normal provision.
Okay. Sir, any reason why MSME slippages would have been higher or QOQ?
No, see, that is what I say. You need to look at it fully. Got it. Actually, there are two other factors. When I am growing MSME at 14-15%, the denominator is also increasing. What we need to be mindful is what is the slippage ratio therein. As far as MSME book is concerned, if you look at a journey for the last four, five years, post-COVID, obviously the NPA was quite high. As on today, I mean, the GNPA on MSME is much, much lower on that. That is point one. Secondly, there would be some slippage happening every we are running a large book, there would be slippages happening, but it's not something structural therein. Two things we have done to boost up this MSME, the fundamentals of the MSME portfolio. One, we said many of my MSME account were also putting a product like cash management, the bank's own cash management application with the MSME account. That way we understand cash flow of these accounts better rather than only looking into the asset-based financing.
Secondly, the government of India has given a lot of, I mean, they have come out with a lot of schemes on the MSME, which are again guaranteed now. I think with both the things, the growth of 14.2% is adequately taking the aspect of the current level of GNPA. This 300-400-500 crore of MSME, this normally happens based on selected geography, some of the aging account, which there is a weakness. It is now no way impacting the overall slippage ratio, the overall slippage ratio is content, including that the slippage ratio MSME also is content.
Got it. Sir, just one last question on margins. You alluded to the fact that three basis points came from repo rate. The remaining five basis points would be day count, do you think, or?
There is an impact of day count, which the CFO alluded to. We follow him with much conservative day counts as compared to maybe a couple of comparisons that he has in mind. The fact of the matter is that there is a bit of deposit cost that impacted us in Q4. Precisely for that reason, we revised the guidance earlier. Rather, I was proactive in revising the NIM guidance by five basis points, thinking that the Q4 NIM is going to be lower than that of Q3. Having said so, going forward, maybe the pressure on NIM would continue for Q1, but it would recoup in Q2 and going to be much better in Q3 and Q4 because the deposit repricing would happen at least in six months' time, and that is going to give us the upside there.
Got it, sir. Thank you very much. Thank you.
Thank you. I think. Sir, if you can just introduce yourself also.
Yeah, I am Ashok Ajmera, Chairman Ajkon Global.
Your 1% does not take any introduction, I believe. No, but she wanted it anyway. Please go ahead.
Compliment, sir, one of the highest operating profit in the quarter. I mean, INR 8,132 crore is not a small profit. Compliments to the entire team for that because at the end of the day, we are all looking at the bottom line, apart from the asset quality, which is in any case very good. Now, sir, this profit has, in fact, a major part of it has gone in the other income, which is non-interest income. In that also, the treasury has played a very, very important role, which every one of us knows. In our case, it is proportionately a little more higher, the other income, which has contributed to the overall operating profit.
Going forward in this rate cut scenario, 50 basis points or 75 basis points or whatever it is, and you said that the NIM in any case, you will try to maintain that 3%, which is already there. Going forward, you don't see that because of the lag effect with this kind of rate cuts coming in, we will be under some pressure to protect our NIMs or you would be able to maintain it. How do you? This is my first question. Second, sir, connected with this, INR 490 crore in this profit has come from an unusual item, which is the SRS revaluation of the NARCL, government guaranteed on the back of the RBI decision. I think it has been done on 31 March itself, when the SRS, which were at one rupee or zero, have been valued by adding to the profit of INR 490 crore.
That also has become the part of this profit. Going forward, I mean, this gap has to be also filled in to maintain the profit because we may not have this kind of profit on now fresh SRS, which are issued, which will be valued in any case as the valuation for valuation. One comment on that, because this has been an important, I mean, INR 500 crore has gone straight to the bottom line. One more thing, sir, which we have been observing in Bank of Baroda, though you say, I guess it is one of the best banks. Most of the other banks, you know, in that family pension where the five-year dispensation was given by RBI, they have not taken that option. They have all written off the entire amount in the book.
In our case, we are still maintaining that leg effect. I think INR 290 crore still has been. When we are already doing so well, we have some buffer provisions also. What is the need of carrying on this kind of amortization, which in any case has to be done next year? As a prudent measure, we could have just written it off. This is the, I think, probably I have not seen in some of the other banks, which I think they have all written off the entire amount. This is the other point which is there. Finally, sir, now, though you are not giving the targets, even for credit, like the largest bank of the country, till last quarter, they were maintaining the credit growth target of 14-16%. Only revision was at the lower end of the target.
Still, they faltered. In my report yesterday, it is released 12%. Even from the lower end of the target given, also they have faltered by another 2%. The reason given was that recovery from some of the large corporate and government-backed corporates, because they had raised capital from the markets. In our case also, was there any similar situation, which is kind of one of which has affected or rather restricted our corporate credit growth also? These are the few observations and questions, sir. Thank you. In the crowd.
Sorry, I forgot because you had a couple of questions in my head. On the first, with regard to the margin, again, for the system also, Q1 is going to be a very, I mean, a quarter we need to really watch it out.
Because after three years, the change has started happening in Q1 over Q4 that we had last year. The margin pressure continued with there for Q1. That is what, again, let us be very clear on that. On a fuller basis, again, possibly most of the banks would be able to, because the ALM management is such wherein banks do intermediation rights, so they need to protect their margin. On a fuller basis, my sense again today that most of the banks like us is going to protect the last year margin. Having said so, we again said that we are not giving a guidance on the margin for at this point of time. We possibly in a position to give a fuller guidance on the margin guidance after the June quarter is over.
Because there we'll just see how the asset and liability are getting repriced, what is that extent which is getting repriced, because repricing is very easy, but let us be mindful of the underlying condition when people move to the capital market rather than putting money in deposit. I wish that I can reprice all my deposit at quick go depending upon the repo cut, but then I need to look at the underlying market. There are challenges over there. The margin pressure continued to be there. I expect Q2, Q3, Q4 will pull it up and fully a margin, my sense again today, which again will confirm after June quarter that whether banks are going to maintain this margin or not.
I am hopeful that banks should be in a position to maintain that margin because this is what the active ALM that we talk about. Secondly, on the profitability side, the NII growth is lower because of the elevated cost structure on the deposit. The interest expenses almost at 13%. We could optimize on the operating profit because the net interest income is strong at 15%. There are two elements that we talked about that I'm going to respond now. One with regard to we had an additional INR 5,600 crore of profit on sale of investment in this year as compared to last year. Going by the current outlook on the rate cycle, possibly the same kind of market also going to be there for this year. That's the sense. If that happens, then we are going to maintain this.
On the element that revaluation of investment and derivative where SR is part of, SR is also investment. I mean, like the valuation done in all other class of investment, SR also the same way it is valued. Suppose you have provided for fully for some proactive and there is an NAB which is higher than we need to again account for that. The benefit is going to continue there in the books itself. I do not see because if you look at this element, there is no incremental. There was a right back of almost INR 500 crore last year and there is a right back of almost INR 450 crore this year on the depreciation front. Going by the rate cycle, I think that again would be a right back going forward because the yields are going down and that is what a sense we do have.
One element that earlier I alluded to was a recovery out of TWO, which supported the operating profit. Our normal run rate on recovery of TWO is roughly around INR 750 crore-INR 800 crore. Every year we are seeing a one-off giving us INR 1,000 crore, INR 1,500 crore, INR 1,800 crore kind of a one-off. This year also, if we normalize the recovery out of TWO, it would be roughly around, let's say, INR 3,200 crore on a normalized run rate, plus a one-off putting us at almost the same level like this year. This is what a sense on the. It's almost INR 60,000 crore as in today. The third aspect that we talked about, I just forgot that, can you just corporate credit, and then fourth is the pension. On the corporate credit, see, we said we are not relying on the bulk part more. We maintain that ratio.
The demand for the corporate credit is there in the market and suppose you want to grow higher, we can very well grow higher, but then again, on a margin sake, we are not trying to get into the fine price asset in a big way, putting the margin under pressure. The demand is already there. In terms of our guidance on the loan growth, we said 11-13, were higher than 13. The global at 13 and the domestic at 13.7. Our retail is growing 20%, which is again the by far, I think on the large PSB, it is one of the highest, including the bank you are comparing. They have a large base, but the growth is less. We have a small base, the growth is higher. MSME agrees started growing at a good pace of 14%.
Suppose I grow corporate at 10%, I'll be very easily hitting the 13%. Another caveat here is that the liquidity this year on the durable liquidity, I think this year is better than that of last year. That is what my sense is. Given a scenario of that liquidity available, possibly we can upsize more than our guidance on the matter. As in today, I'm holding my guidance of 9-11% on the deposit, 11-13% on the advances, with the understanding that if the liquidity prevails, the surplus liquidity, possibly we are going to upsize both the guidances. Pension can, yeah.
Ajmera Ji, you are absolutely right in saying that. It's a prudent call taken by the management as per the RBI guidelines. In any case, that dispensation is going to be over in the current year itself. SRS on INR 20,000 crore of net profit, INR 290 crore is not a, yeah. I don't know, it's a good suggestion actually. I didn't strike to my mind, otherwise we could have taken off. Thank you.
Thank you. We'll take a couple of questions from here. You can please raise your hand.
Yeah, hi. Thank you, sir. Param Subramanian from Investec.
Yeah, Param.
Sir, first question is on the NII growth, right? This quarter, we've grown our loan book, our deposit by between 5-6%. The absolute NII is down 3.5%. Can you explain that? Because it seems to indicate all the incremental business that we've done in this quarter has given a negative net interest, right? Simplistically, that's what it seems to indicate. Eight basis point margin decline doesn't tally with that. That's my first question.
Yes. It's not so actually. Had it been so, my bulk outstanding would have gone up significantly because the high cost deposit is the bulk cost, right? Had a, like your balance sheet expense on deposit, I mean advances, you are funding by raising bulk deposit, the cost would have significantly gone up. Actually, the impact of the deposit is typically, if you look at our contour of growth, we had slightly lesser growth in June, slightly higher growth in September, almost a good growth in December. The impact of the full quarter when you raise the deposit at a, I mean, the structure was definitely elevated, not the bulk, the normal deposit. It's sometimes on a quarter, it gets the full impact of that. Like a deposit which would have mobilized prior to December would have full quarter impact in the March quarter.
Because of that, the margin got impacted, the NII growth has been less. Actually, if you look at the income growth, it's almost at, and looking at the lag time in terms of the curve of both asset pricing and liability, many of the, actually looking at a cut in the overall market scenario, the asset pricing started reacting to those anticipated cut and the things went down particularly, right? The ability to command a better price on the asset was limited in the December quarter itself. The NII growth is a combination of both where the asset didn't go up to the extent the deposit was increasing, the cost of deposit was increasing, leading to a lower NII growth. I think it is entirely in line and sync with the market actually, if you look at it.
Somebody would have a Q3, the impact would have come, some bank would have a Q4, the impact would have come. Many of the banks have taken the maximum hit in the Q3 itself on the NIM, and they are almost at 2.7, 2.8. I still had an elevated NIM 2.94 in Q3. I took a cut in Q4. Slightly, how does the lag, the curve plays out, that is important. Anything you want to add on this?
No.
Sir, on the interest income, right? We said there is some day count impact. Can you explain that? Is it on interest accrued, there is an impact?
No, no, there isn't. As far as we are concerned, we are consistent. The day count is same. Actually, he was, because there was a discussion with regard to how do you compute the NIM, and then some of the day counts of some of the other banks are different. So the NIM numbers, that is what he was explaining. As far as we are concerned, our NIM count, I mean, sorry, our day count convention is the same for across all asset class.
Is that any?
Yeah, absolutely. Only day count in the sense is that 92 days versus 90 days. That's all.
Because the other banks have explained it has a positive impact on margin, reported margin. They have a positive, I do have a positive. Okay, maybe I'll take that offline. Sir, when you said that NIM guidance, as in you expect largely to be flat in FY25, first dipping in Q1, are you talking about versus this quarter four NIM or are you talking about fully?
Fully, fully.
Okay.
We compare full year to full year. Secondly, let us also understand one thing because see, we are running a bank and then you are analyzing the investor point of view. Going forward, when the Indian market gets into a bit of a mature market, because we operate globally, so we do have the experience of operating global market, particularly on the margin front. India cannot have a very high NIM going forward. Let us understand that need to, need to get, I mean, we would have heard somebody's comment that the banks need to reduce their cost to income significantly to maintain the profitability.
That's a fact going to happen. We need to understand that. The only way in a market like this, when the cost is elevated, pricing banks are not able to pass on, is to get into risky asset. Again, we moderated our personal loan book two years back. Because we count principal more important than only looking at a NIM and getting an incremental income because that is what not our cup of tea in terms of managing that book well. We moderated personal loan book two years back. We announced we are the first bank to announce we are going to moderate on the personal loan. The issues came one after one year later. As I said that while having a growth margin trade-off, what again I am mindful of is the asset quality.
I think the bank has a very strong oversight on that, saying that we should not create a book again which can give a bit of stress later on.
Okay, one last question. On 20%, you said you have bulk deposit. 20% of total deposit, yes. Yes, that includes pricing lower will happen immediately in Q1 and that will give some.
No, no. Actually, the book is almost 70-30 bulk and CD together. Bulk is one year CD, almost three months to six months that you can take. Average duration can be nine months you can take it. One third of the book would get repriced in this quarter and something already happened at a 40-50 basis points lower in this quarter itself. Anything Mr. Tyagi, you want to add?
Yeah, so in fact, if you see the money market instruments have reacted quicker than the core deposit products, and probably that we have started witnessing. We believe that if RBI remains benign in their outlook, irrespective of the timing of the rate cut, probably money market deposit products or borrowing products trajectory will be trending down. That's what our assessment is.
Thank you, sir. Pooja, there's one question.
Hi, sir. This is Piran Engineer. My auto. Yeah, Piran Engineer from CLSA. Firstly, on your guidance, deposits growing 9-11% and loans 11-13%. I mean, that mathematically implies we'll have to further reduce LCR. Are we comfortable with that? Because we are at 123%, which is lower than most PSU banks, even private sector banks.
Sir, there are two things here. As far as LCR is concerned, we'll operate at a 120% level, right? LCR is many components, including impacting on the deposit and also on the HQLA side. We have almost 7%, 6.5-7% excess SLR as of today. I can very well switch asset within the excess SLR to make my HQLA higher. That point one. Secondly, while managing asset liability, I mean, we also rely on borrowing wherever the funds are available at a cheaper of funds than we go there. We raise infra and others last time. There are multiple options available to manage the LCR, but our comfort on normalized LCRs would be around 120. That is what we'll aspire to do. Even sometimes people say that maintaining 120 is slightly or maintaining high, but I think as a prudent liquidity management, we'll maintain it almost at 120, right?
Yeah. Our internal take always remains that we should operate in excess of 120 or around 120.
Okay, so there's a factor which again you can talk about is the CD ratio possibly, I mean, with the guidance that we give. We said earlier also we are comfortable maintaining CD around 82-84 level. That's why actually the international growth we are moderating, one reason because that puts huge pressure on the because they have an almost 100 CD ratio. Earlier the international growth used to happen at 25, 30, 35, where now it is at almost less than 10% or aligned with the corporate growth. We are moderating that count just to maintain the CD because we find opportunity in domestic market much more attractive as compared to international asset on that.
Fair enough. Sir, in our EBLR book, do we reprice on T plus one? What is our methodology? Or is it different?
It's actually, in fact, automatic, but then the ALCO is the competent pricing. The moment there is a repo cut, next day we have the ALCO to announce. That's why it is T plus one. Right? Anything anyone want to say? It's T plus one just because the ALCO is a competent body to do that. So announce it on the next day. The benefit goes on the T0 or no? No. T plus one. The benefit goes on T plus one.
Okay, got it. That's it from mine. Thank you .
Thank you. I think we have a question behind, Sharmisha. Is anybody here? Yeah.
Hi, this is Rakin shah from IIFL. I had a question on margin and I wanted to break it in two parts, the domestic and the international. Even if we look at the domestic yields, they have been sliding down in the last two, three quarters. Especially if we compare vis-à-vis the larger SOE band, they have been able to maintain it stable. What kind of assets are we kind of lending to where we are seeing so much of yield pressure, especially when the rate cuts were not there? The second part is on the international side. Here we have pretty balanced loans and deposits from overseas, broadly 16-17%, vis-à-vis the other bank which has only 4-5% deposits coming from the overseas. Ideally, I would have thought that we would have been able to show a better international NIM trajectory vis-à-vis them.
Again, our international NIMs have declined more vis-à-vis them. Why is that happening? Those are the questions on NIM. The second part is just on the MSME. While it is just a slight uptick, it would help if you could just explain or provide some color on what kind of customer segment, if there is any specific thing that you could highlight where it is coming from. Thank you.
See, I will come to the international margin later, but let's speak about the domestic one itself. The peak level of domestic NIM was at 3.32 when before all this happened, right? Two years back. From 3.32, it has gone down to 3.18. All of us do understand that the deposit market was very tight last year for multiple reasons. One is that the normal retail deposit also, the peak rate offered was almost at INR 730.
Many of the banks offered at 7.30. There was an increased cost happening over there. Obviously, when the deposit underlying market has an elevated cost, it would put pressure on margin. I'm happy that I'm running an excellent rate-sensitive asset and liability so that if there is a, like all of us need to be bullish at this stage, if my asset liability has reacted strongly to a rate change that's happening in the market and looking at a current scenario of downward cycle, I should be much more positive on that, right? We'll rip the upside on that. At 3.18, also, let me again say that if you compare the large PSB peers, we are one of the highest. At 3.02 full year also, we are just second to large PSB peers. I'm talking about the largest bank of the country.
Our NIM level is not the issue. The issue that possibly all of you again was this change that happened. My sense is that the change happened for a genuine underlying cost structure in the deposit market. Now since things have changed, I'm much more optimistic that it should happen going to be for the full year. Again, Q1 would be still a challenge because the deposit resetting would happen with a lag. That's the domestic part of it. The international NIM, we run a larger book on the international, almost 16-70%. I don't know if you look at two, three years back, the NIM of international was very low at 0.47. In three years' time, it could optimize to 1.97. At one point of time, December, we crossed two.
Internationally, what has happened is the rate cycle, the changes happened almost around six months prior to what is happening in India now. The time we went to the international market, increased the book, we got at a very good price on those assets. Now all those assets are getting repriced at a lower level, barring this new change that is happening in those markets now because of the tariff and all. The NIM is going down at the international account, and the international NIM is almost like 60% of the domestic NIM. Since I am running a larger book, the impact on the global NIM is much more as compared to other banks who have a 4% book over there.
The bank having a larger book on international with a lower NIM of 1.9 is going to be impacting global NIM much more as compared to the other bank. That is what the issue that I want to highlight on.
Sir, if I can just, you know, follow up on this. In the domestic part, my question was not on the margins or cost of funds. It was only specifically on the yields. The loan yields have been going down in the last two, three quarters in an environment where there was no rate cut. Why was that happening? In the international, while I accept your point that we run a 16% loan book, which is overseas, the other bank also has broadly similar. The deposit is a much higher proportion for us.
I got it. I got it. We run one of the largest corporate books. I mean, my corporate book is INR 411 billion as of March. In December, it was less. On the international, I'm running a corporate book of almost INR 2 trillion. INR 6 trillion is a corporate book that we run, and that is by far within the large PSB, excluding the largest bank, obviously, is the maximum. What happens on the MCLR, the increase in MCLR happened with a lag, much lag after the BRLR that happened immediately with the repo rate hike. The lag effect is almost one year to one and a half years. With change in MCLR, there are a couple of elements there that some of the asset contract you only do at the time of renewal, you can't do at any point of time.
The asset repricing at a level happened at a different point of time. Once it achieved that level, then it was plateaued at that point of time. The yield on advances for most of the banks, I do not have a proper number now, but I think it has gone down across, right? It is not only specific to Bank of Baroda. In that sense, I do not think there is any aversion over there. Actually, it is in line in sync with the market. Anything you want to say?
I think I can add another thing is that, you know, last year, despite there was no change in the interest rates in the market, but out of the competition or the expectations of the customers of various segments, including corporate and retail, there was moderation on the absolute lending rate.
If you look at the home loan rates, banks are offering one of the most competitive rates, whereas the deposit rates have not come down. Corporates also, highly rated corporates were expecting fine rates because they have the option either to go to the loan market or to the debt market. Some of those reasons played out in terms of absolute moderation at the top end. That is how somewhere we tried to moderate the corporate growth to save some. Someone was asking that 10% growth and 9% growth. INR 5,000 crore here and there, we would have been there at 10%. That kind of, you know, the top-end book was giving that kind of impact.
For the pardon? MSME specifically, would you like to talk about that? What is that composition of the book in MSME that you want to know?
In MSME, the bank is focusing on the sectors which are giving us the good asset quality, number one. Number two, giving the good earnings. We are presently focusing on the CBCME segment, then supply chain finance segment, then we have innovated the product cash flow-based lending, smart overdraft limits. These are the segments where we have started focusing. As far as the MSME NPA, which you are talking, which is spiked in the last quarter or last year, that is in the legacy accounts. As far as the NPA as a whole is concerned, I think Bank of Baroda's MSME book is a quality book. We are having below 8% of the NPA, around 7.5% NPA in MSME book as compared to 17% which had been in 2021. All other banks, especially this is the lowest NPA in the MSME.
This is the sector which gets affected immediately. If there is anything that happens anywhere, this is the weakest segment which gets impacted immediately. I think this book is a well-quality book. There is a good growth in this book. Government of India is focusing on this segment in a big way. I think we are part of the economy and we are focusing on this book. Government of India has provided many schemes, many trade guarantee schemes in MSME. I think MSME is going to grow with a good speed. The book is protected from any of the slippages. Just to add to him, the change definition of MSME, which was announced recently, is going to give a huge upside on the growth. There are typically mid-corporate accounts getting into MSME because of the change definition. That is one focus area.
Secondly, as you rightly said, the CBCME, where it was never a cup of tea for public stock banks. For Bank of Baroda, for the last four or five years, we are into that product. There is a good outstanding book on CBCME. The supply chain is one thing. Trades is one thing, although these are a bit fine priced in terms of return they are in. In terms of the control of the book, we are going to focus on the main core MSME with a cash management product that gives a better control. We are going to focus on the new mid-corporate accounts by change definition is going to be MSME. We are going to focus on two products where we do have a huge expertise now of having done those products for four or five years now, CBCME and also on the supply chain side.
I think that all of things would give a good growth to MSME. And subsequently, the NPA in MSME also, I mean, it is decreasing year to year, quarter to quarter, and going to be further down going forward.
Thank you. I know we still have some questions, but we'll just move online for now. There are a couple of questions online. The first one is from Sandeep Joshi, who says, "Is the bank evaluating increasing the credit spreads for corporate or retail loans in the current interest rate cycle? If yes, was the bank able to increase credit spread when it passed on the rate cut for its corporate book linked to T-bill or GSEC rates?"
Yes, Sandeep, for spread resetting, there are guidelines by the regulator, and it happens up to three years only. There is a large number of accounts where spread change happens only at the time of renewal. There is not a uniform policy of changing the spread. It can only be done at the time of renewal based on the quality of the account. There are internal rating over there. If there is a deterioration on either internal or external, obviously the credit spread would change and give some upside on that. On the retail side, again, similarly, many of the scheme rates, there are protections available even if on the repo rate side, protection available. A couple of schemes where up to three years, we can again reset the spread. It is a combination of multiple transactional things, not as a policy, we can say.
Yes, with a downward rate cycle, the change of spread can be one way to protect the margin, and we are mindful of that.
The second question is from Manoj Alim Chandani. Yes, two questions. Please share your thoughts on the outlook for the treasury desk performance with one of the best treasury desks. Please share on AI and technology initiatives and operating leverage benefits of technology.
Thanks, Manoj, for asking this question. First question, Mr. Tyagi, can you just answer it? Outlook on treasury.
In fact, last year has been one of the very good years for treasuries because of the movement in market interest rate favoring the portfolios. We believe that the kind of outlook for this year is treasuries are again going to perform better, maybe similar or slightly lesser than that, depending upon the absolute interest rate change over the year. I believe that in terms of their another objective of maintaining the wholesale book cost trending down, again, there will be a good improvement this year also. Overall, treasury will continue to give good performance in terms of profits as well as maintaining the cost.
Mr. Mudaliar on the AI and technology related aspect.
Yeah, good morning to you, and thank you for the question. See, the Bank of Baroda, we are looking at technology for a couple of things. Apart from the customer service and innovative product, we are looking into creating some kind of a resilience in the system. On both the fronts, we have been working for quite some time now, and we do have a very strong platform currently to service both the sides. That is the customer service side as well as the internal resilience building.
AI has been very extensively used for both the purposes for building our internal resources as well as customer service delivery points. Both the sides, we are well covered, and we have been doing quite a few innovative products on both sides. Thank you.
Last question online from Ankit Vihani. What is your loan mix, repo, MCLR, and fixed rate?
Madam, you have the composition?
Yeah, so our repo linked book is 34-35%. MCLR linked book is anywhere between 45%-48%, plus minus 2 percentage points. Fixed rate is not very large in a very low single-digit percentage.
Thank you. I think you have a couple of questions. Yeah, right on the front row. Okay.
Congratulations for stable trajectory, socially jux in that equity. Knowing your experience in treasury and money markets over a decade, and the outlook what we are heading towards in the next 12 months, specifically on bonds, CP, corporate borrowing, how do you see your corporate and RAM book shaping up compared to where we are today at 60-40 by the year end?
No, that is what I said. On the RAM book, we almost added 190 basis points in the last 20 years. March 2025 over March 2024, the RAM has gone up by 190%. Considering the segment-wise growth guidance we are giving, we continue to have the same journey. Maybe in three years' time, by adding 200 basis points every year, we want to achieve 66 in RAM. That would give me a bit of a diversification benefit on the RAM side, not only the return perspective, but also a diversification benefit.
We want to be known as a retail bank rather than more of a corporate bank. At the same time, the corporate growth continued to be in excess of 10%. I mean, we are running one of the largest corporate books in the entire country now. I mean, in terms of public-private together, maybe we are at third; within the public, we are the second. If I add my international book, which is again corporate sanctioned from corporate office, the book is almost INR 6 lakh crore. There, the growth guidance will continue to focus strongly on that. We built it on the asset quality front. We built it on the relationship manager front. We want to add some kind of a concept we have called account planning, capturing 360-degree relationship. There are teams dedicated to engage over there. We created skill on underwriting.
We hired industry expert for advising us on the matter. We are creating also capacity. Corporate continued to grow at 10% plus. At the same time, RAM has to grow on average around 15%, putting something on a 200 basis points change on the RAM book vis-à-vis the corporate. Looking at the capital market, corporate ability to raise money from the corporate market rather than coming to the loan market, it is there for long. I mean, they also optimize the time they find that is attractive, and then they go for that market. The moment they find almost at par, there are distinct advantages of somebody availing a loan because you can tap that loan at any point of time, not like a bond. You have to issue a bond.
Bond, there are hidden costs in terms of the issuance, blah, blah, blah, maintenance, which the loan market doesn't. It will continue where comfortable with operating in both markets and supporting the corporate on that.
My question was more, how many rate cuts are you expecting from RBI this year? Where do you see GSEC specifically in India? Where do you see? We can't predict what Trump and Fed will do, but still keeping that in mind, what is your outlook by the year end?
Our house view is that there may be two more cuts by March 2026. That means 50 basis points we are expecting. The GSEC already, because as you know, it's a lead indicator, reacted already to a couple of cuts going forward. On the best-case scenario, GSEC, we are looking at six quarters. Currently, it is almost at 636 or 640 kind of a level. Our book is well positioned on the treasury vis-à-vis. Suppose it happens at six quarters. The trading profitability of the book is much stronger because of the huge STM book we have. Where one bank, if you can mind it, there is an item in the balance sheet, if you can closely follow, I mean, vis-à-vis other banks. Whereas running an AFS reserve almost to the extent of INR 2,000 crore, you'll not find this element in many banks, actually. I'm not comparing, but I'm trying our focus on that. So our strategy is to preserve value in the book rather than encasing for a short term. Yes, we'll do a balancing act in that way, keep the value of the book intact at the same time. Opportunity we need to capture to take more trading profit for the matter.
Assuming your RAM would be at 62 and 38 corporate based on domestic international, and you measuring international book and domestic corporate book may arise. Keeping the money market in line, you may not name the customer, but if I eliminate PFC, REC, NABARD, NAFID, certain similar accounts which are government-backed or AAA customers, and I am looking at your slide of NBFC, which specific sector, one is MSME you highlighted, housing loan may be still attractive as rates are dropping despite real estate prices being high. Where are you seeing positivity and which sectors are you seeing negativity from our bank book that you would avoid in the year?
See, as far as tapping the market, depending upon ability, excluding the large public sector PFC, but other NBFC also tapping the market big time on that. RBI, the risk-worth was slightly, it was we reduced the growth on the NBFC. Now the risk-worth is taken out. We are again growing on the NBFC book. As all of us want a strong market both on the bond side and also on the loan side. The corporate bond market is not that strong as all of us wish that market to be much stronger. There are committees working on that. Actually, there is no specific, look at the industry data we have given in the analyst where the industry-wise, the composition of the book and the growth we have given. Our book is there is no sector which you want to avoid.
Every sector we are there in, maybe the growth percentage can be 4%-16%, depending upon the opportunity available therein. As far as housing is concerned, suppose you say that I'm growing at 20%, market is growing at almost 16%. There is a market actually gives an opportunity. It's asset-based financing. Suppose you underwrite fully, India retail debt to GDP is still the lowest, one of the lowest. I don't think there are any constant for us to avoid any particular sector, whether in the bond side or the loan side. Bond side, there is a minimum threshold rating that every bank has. We are open to lending in all sectors in both the on the debt side, also on the loan side.
Your TAT and process centers, specifically led by BOC, shared service, all that is known in the market.
It is.
It is helping you in the sector. I understand that you will grow faster than the system.
Yeah.
Systematic growth, you may grow by 4% higher, 5% higher, 7% higher. If you are to choose a sector, housing loan, I understand. Anything specific other than that stands out. Supply chain you are doing well, I understand.
Auto loan has been also consistently growing more than 20%. That is a market India has seen a significant growth. On the mortgage, actually, there also the growth is almost 16-17%. Mortgage typically, NBFC do strong business in mortgage market. Typically in the form of a retail lab or a corporate lab, they do strongly. NBFC have a huge book. Policy bank slightly, I mean, they were not so strong. Now we built up that model to deliver on that count.
Couple of on the MSME, which again, I mean, if you compare the PSU pack and then figure out the CVCM is one product, supply chain is another product where we have an aging of almost four, five years in terms of running this business. I mean, there again, private sector banks were very strong on these two products earlier. We are now four, five years picked up our skill, rather more than four, five years. I think, I mean, opportunity are there. Suppose I want to grow, let's say on an underlying good liquidity market for this year, durable liquidity, which again, all of us think so. Ability to grow at 14-15% can be a we can always achieve not only the system, Bank of Baroda's system can also achieve.
I think the loan growth in this year has to be higher than the last year on the backdrop of the system as a whole, on the backdrop of better liquidity. This quarter is slightly a dampener as of now because of immediately getting into a slack season, then a lot of resetting do happen. I think by Q2, Q3, it would pick it up.
Where do you see, how do you indicate or how would you process that CASA is very stable or grow from where you are today? Second thing, what is your digital spend because you're doing a lot of RAM? Your digital spend would be on new initiatives, will be higher than where we stand today. That CapEx also will be with AI and many things you will change. These two sustainable numbers and where do you see the focus on spend on there?
See, rightly we wanted to, when the CFO made the presentation, he talked about CASA % growth as something that he wanted to highlight on that. We realized two, three years back saying that CASA is going to be a challenge because there was an underlying, I mean, pockets where the CASA was very strong. Started reducing on those pockets like Tirtu City where CASA normally is very high, used to be very high, went down because of the, I mean, change preference. We focus on, we have not increased the CASA rate mind. I mean, on the entire rate cycle, the CASA rate was the same like it was there earlier, maybe a 5 basis points change. Many of the banks would have increased significantly.
We have not reduced the CASA rate therein. Still then, because the service offering we improved, bundling that we improved, our growth is, and I should not say, but then you can differentiate in case you compare data with other banks. Where, I mean, in the CASA also, there are two components. One is saving, another is a current. I mean, segregate both the data and compare Bank of Baroda's saving growth vis-à-vis the system saving growth. Through all these measures, I think that's not, we are not satisfied. We need to grow much higher on that. There again, we created a bit of resilience in terms of attracting good deposit. Continue to focus on that.
This quarter again, a couple of growth, component-wise growth guidance possibly in the position to give only after June because there is a change happening in this quarter, which need to be mindful. Your second question was on digital spend. Yeah. Digital, since there are a lot of initiatives which have been taken, there is a consistent movement on increasing the spend on digital or tech as a whole. We are currently somewhere around 10% of the operating profit. That is what we are looking. We will try to upscale it based on the kind of environment in which we are growing. Including with the AI coming in, obviously the cost, the investment will go up on that side also. 10%, just with a small clarification, 10% including CapEx, OpEx together. Yeah.
Secondly, you highlighted that you would be rather, you wish that we are recognized as a consumer bank, not a corporate bank. Now being a wish to be like that, not like recognized, but then we want a higher retail book there in the. There is a benefit also if you are a true consumer bank. I am nothing against that. Keeping consumer bank logo in mind, what are you going to do to cross-sell? Because you have bought capital market, you have bought shared service, many other things. How is your income compared to specifically, let's say SBI or HDFC? The trajectory you would look in next three years.
See, on this consumer piece, frankly, I mean, the banks you are referring, we started very late in that manner, actually. The growth for the last three, four years has been good on the consumer side. We created capacity, the flow, actually, you talked about the TAT, we follow on the consumer loan, the sourcing that happened on the consumer loan, the underwriting models we have on the consumer loan. The underwriting model has a lot of fintech interface over there. Improved capacity in the entire consumer loan piece. We continue to drive to attend certain number, and that depends upon the current available data, which gives us comfort to drive more. If the data, again, on the numbers and data, if there is a change, then we'll revisit on this guidance also. We want to grow because I have 8,200 branches. I have large footprints in terms of digital. Suppose I don't create consumer base therein, then I think I'm not doing proper work on that. We want to focus on that.
We want to have more and more customers with us. We want to have more and more customer flows with us. We started a super app recently called BOB EPAY. BOB EPAY is one app which is also meant for customer and also for non-customer. Precisely the theme that you are telling with regard to the consumer base, the idea of that app is that the BOB world is only for customer or a new customer onboarding into the bank as a customer. The generic different app, although learning two super apps is difficult, I understand that. We need to target the non-customer. I mean, they need to be part of the customer. Once they get a service of the bank, possibly they would be a future customer. We are targeting how do we attract.
Yes, BOBCAP, I have insurance business that also is a retail business. I have a card business that is also a retail business. BOBCAP typically helping us in terms of how do we again the reach within that consumer base. I think as a group, we are very well placed to capture this market.
Having insurance, credit card, share advance, mutual funds, the base what you have today in the bank, can it double in three years?
You know, what can we double in three years?
The number of customers you have between this cycle.
That's difficult to say, but then my consumer base is increasing that next time I want, I'll give you a data, my consumer base is. That is what actually the idea is to capture customer. Actually, let's take a very simple example.
I mean, if you go to the fintech, it's one of the challenges for commercial banks, right? Fintechs, they've grown big time. What is the primary objective? They acquired customer and then they try to create flows. Now they're trying to create book even within the four wall. I can say they're trying to create a book even. One of the key challenges that we are trying to address as a legacy bank of 117 years is how do you again attract customer into my system? Whether it is a small UPI system or a big loan system or a digital lending system, I need to acquire customer. I need to source customer. I need to have new customer coming to me. My customer, the aging profile of my customer should decrease because I want the young customer with me.
All these efforts, we have operationalized a company called Baroda Sound Technology. I mean, that's a tech company within the group, Bank of Baroda. We have operationalized that. The idea of this company is to get into emerging technology so that all these young customers be part of, part with the bank. There are efforts going on, but exactly I can't give you a number, but we are working on that. That is what certainly I can say.
We'll just move on. Sorry. I'm just asking more questions on this side.
I'm just thanking him. Nothing more.
Good luck for the year.
Thank you very much.
We'll try and take the last question from, I think we have.
Yeah, nice. Antarikshram,
Maybe he's the, you are the last one, last to last one, then you are there. Please go ahead.
I say, I say proof, so I'll just keep it crisp. One is, is there any possibility that you take some rate action on your savings account, like some of the other private banks have taken, reduce rates in savings account?
See, I have not increased during the rise, so why should I reduce during the fall? Actually, there's no case for that.
Sure.
See, the only increase that we had is a 5 basis points in last so many years. I improved the service during the time. Let us remind. I improved the bundling product, the offerings along with the saving. So that is what we maintain a better CASA, but I don't think that is anyway, ALCO is competent to take a call, but then I don't think there is a case for it.
Sure. On the MSME slippages, I can see that your SME number is down from about 50 - 33 basis points. But that's 5 crore plus. Does that include the MSME slippages or the reduction is entirely because of? Anything clearly more than 5 crore is captured over there, whether it is, I mean, corporate. What I'm trying to ask is, sir said that the slippages came from legacy accounts. If they were legacy accounts, then was it part of your SME? That's what I'm trying to.
Actually, the SME one two book clearly, it is almost at point what? 180.33.
Yeah.
There is a lumpy account over there, not on the MSME, but it's a guaranteed account of a state government. If you exclude that, it is even - 0.10. That talks about the quality.
That account, it goes into SME and some of the quarter it goes into SME and then pulls back because the government has, no, I can't say that. There is a lumpy account of a state entity, a lumpy account, not a central entity account.
Just clarifying, you said 34-35% of the book is repo linked. That entire 34-35 basis point, 50 basis point reduction in yield is happening.
Yeah, yeah.
It is already done.
That's true. That's true.
Last bit on trade-off between growth and margins. I mean, you know, there is a credit growth number that, you know, makes a lot of us happy. At the margin, if I look at the composition of your deposit book also, right, bulk has still grown higher than overall domestic deposit growth. Were there segments even in non-corporate, within retail, within MSME where yields are low because of competitive pressure, because of rate structure, whatever, where you think that growth could have been sacrificed so that your NI growth would not have been just 2% for the full year?
No, no, growth nowhere to be sacrificed. That is a trade-off we do internally. That is why we, one bank, we keep on saying that as far as building block, asset quality is the first piece we look into. The second is margin and third is growth. While trying to always margin and growth, there would always be a trade-off and that is very challenging. Currently, whatever growth we have given, we are comfortable on those segments. That is a segment. Otherwise, I said on the corporate, the growth potential was much higher.
We decided not to get into fine price asset because they are high quality asset, no doubt about it. Every bank would like to be in that account. We decided as a strategy not to get into. It is always a balancing call. I mean, fine price book is something that always a debate in different committee. Otherwise, we are comfortable growing wherever we are going as on today.
Manoj sir, do you know what was your PSLC cost that we had to bear in the year? If, or we can take it later if you do not have.
We had a PSLC, but then my PSL target we achieved the 45% as against the targeted level of 40%. With the change definition, this 45% is going to be 48% again. Adequately book has the PSL compliance, which are based on the priority sector targets. I think you have one thing I can just give up.
I'll come back to you last.
Good morning, sir. My name is Vinayak. I'm from Jefferies India. I had two questions. Firstly, on mortgages. We've taken some sharper rate cuts in mortgage from 8.4 to 8. Could you explain the thought process behind this? Second, sir, continuing with the international segment, given that global yields are falling, how do you expect the international margins to trend?
Okay, mortgage book, see, already the existing housing loan, the rate that you are referring is the best rate to the civil 800 plus kind of a 750 or 800 plus customer. The card rates are different. Card rate is not at 8. The card rates are different at different civil score. All the existing borrower already they got the benefit of 50 basis points.
When we announce the new scheme, obviously you need to make it at par with the existing customer and the new customer. That is why the new scheme has come. In the process, the new scheme is not going to give me a lower yield as compared to the existing book, the yield it is giving. It is perfectly mapped in the manner where the yield of the existing book is protected in the new scheme that we announced recently. There is no challenge over there. International, as I said, international we see a, I mean, good NIM expansion maybe a year back. Quality assets which are market name in global markets, we could pick it up maybe 1% lower than the domestic market rate at that time. I mean, because of a peculiar scenario where some of the yields in those markets went up sharply.
We could grow at that time 20%, 25%, 30% on those markets at that time. Now the scenario is different. All these assets are getting repriced at a lower. The price has gone down. Our normal theme currently, the international NIM is at 1.995 something. The normal threshold that we need to operate in that market, any NIM which is above 1. book as a whole, not transaction-wise, any NIM which is more than 1.75 and higher. That typically can protect the impact of the international NIM or the domestic. The market goes on, we'll try to maintain both the market therein. Anything else to tag you on to end on the international?
Another thing is that unlike domestic market, the international both side liabilities as well as assets are largely linked to the floating rates. The only impact can be lag effect. Sometimes assets are getting repriced faster because of the linkage of different benchmarks. Let's say one month, one month SOFR-linked assets will get repriced faster than the three months SOFR-linked liabilities. Barring that, both the sides are largely floating rate linked. All in all, we remain insulated largely because of the benchmark movement. What we basically look at is what kind of assets we are onboarding, what kind of spreads we are heading into. The syndication book is giving us that much headway. What Amnesty is saying is that largely we remain focused towards that kind of spreads in the international book.
With this, you have the last question and I have the last answer also ready. I mean, that I'll give.
There is one old large aviation account. I think you and Central Bank of India, you two were only having the very large exposure. I think overall was about INR 2,200 crore something. You had some extra collateral property also of INR 1,200 crore something. We have not heard about that account for a long time. I think in last meeting also we not discussed. What is the status there and what are the recovery charges? Is there any scope for the lend to be monetized and to come as a buffer in the profit in the bottom line?
Yeah. See, out of that exposure, one third exposure we got through the guarantee money which was invented in one third already we got it. Rewardy as exposure has gone down to two third on that. There is a large land parcel is there as a collateral. The process is on.
There are a couple of actually the Central Bank of India is the lead here. Yeah. They already one or two bid process that run through there. Again going for further process on that. It takes time normally for realizing particularly large piece of land, any value on that. There is not much of development on that account for last three, four months. Anything happens, then we'll let you know on that. The bank is adequately one third already got. No final loan loss. I'm not expecting any loan loss on this account. I mean, the account was fully provided. I'm not expecting any loan loss as of now on this particular account. Only last year, answer from Madam Beena, would you like to say something with regard to the liability side? What you have done something extra on that?
It has been a difficult year for liabilities. In spite of that, we did well. We were within our guidance, whatever guidance we had given. With regard to CASA, I think there was one question which I would just like to add on to what the MD said. See, with regard to CASA, almost 24% of our CASA is institutional and 76% is retail CASA. In the 76%, though, if you see whichever banks have now declared the results, if you see their CASA, we have done much better than the others. We almost had a 6.5% increase in CASA. What I would like to add on here is, if you see the retail CASA piece, we almost grew by 5% in retail CASA. That is something which has been good with regard to the liability piece for us.
I wish all of you to open a Masterstroke account. That's one thing where curated account curated by the master himself. That's something I think.
Sir, just a small last one. We have a, excuse me, my throat is a little bad. I have been traveling actually. We have an MOU with IREDA. We entered with MOU with IREDA for the solar, I think proposals and this thing. Where our exposure is INR 18,547 crore total in the renewable energy. In case of IREDA, what kind of arrangement do we have? Does it come automatically whatever project IREDA appraises and takes? We automatically take some share out of that or every proposal is separately appraised by us. Like recently, I know they have taken one proposal of just some INR 1,450 crore, INR 1,450 crore, a project of INR 2,150 crore on that this thing. What is the mechanism set up under that MOU to have those loan accounts?
The MOU is a non-binding one in the sense that suppose a proposal being originated either by IREDA or by Bank of Baroda, it's only we give it to the other party for their evaluation. Nothing beyond that. It's not that suppose a party X has given a sanction and he wants to, let's say, downsell a portion, the other party automatically takes it. No. The only thing is to induce that proposal on a first right of refusal kind of thing to the other party. The other party has to decide on the quality of the proposal, their own underwriting standard. Full appraisal. Full appraisal. Full, absolutely full appraisal on that. Thank you. We have signed up with not only IREDA, we have signed up with REC.
We signed up also with the state government where one of the banks signed. I just found it here actually. I thought. Yeah, we signed up with the state government also an MOU for funding renewal because that's a champion sector for us.
Thank you, sir, and all the best. Thank you.
Yeah. Ajmera sir, one more thing I can add towards the last is that these MOUs work towards and they go beyond the loan relationship or loan engagement. For example, IREDA can't issue LC if LC is required in a project funding. They can collaborate with us provided we accept the credit as the acceptable credit. Then they require escrow account to be maintained. Here is an MOU which works when the teams engage with each other in a structured manner and mutually, you know, they garner the benefit. It is purely acceptable to the bank running on our own due diligences then only. MOU does not induce any responsibility either on IREDA or Bank of Baroda.
Once again, thank you all of you and sparing our time today. As I said, that is an eventful morning as far as the country is concerned. Sparing time, again, thank you. Initially we planned for 45 minutes, but it went on for 1 hour 30 minutes. Thank you all for that. Thank you very much.
Thank you.