The recent volatility in Indian rupee has adversely affected businesses thereby pushing many to losses. The gravity of the situation is such that Bankers have started appealing to the companies and entrepreneurs not to get attracted to currency trading just for short-term gains. While speaking to Rutam Vora on prevailing macro-economic conditions, S S Mundra, chairman and managing director, Bank of Baroda cautioned industries to avoid a business, which is not their cup of tea. Excerpts:
What is your view about rupee’s volatility as experts still feel that the Indian currency has yet not stabilized?
This may not be the real level of rupee. But one must accept that the currency is less volatile now than it was in recent past. More than the levels of rupee, the stability in the currency is important. Also, I appeal to companies and entrepreneurs not to make blind bets in currency. We have seen companies with good mainline business and fundamentals end up in huge losses just because of wrong strategy in forex trading. This is not everyone’s cup of tea.
While economic environment continues to remain gloomy, what is the road ahead? Which sectors do you see growing even in the current economic scenario?
There is still a silver lining there. Monsoon has been exceptionally good this year. We expect agriculture growth to be more than 5% from 1.5-2%. Also, several infrastructure projects have been cleared by the cabinet. Also, employment index is showing a rather positive picture of no slowdown in employment. SMEs in the sectors like exports, phrama, information technology, cotton-textiles, tractors and oil exploration are likely to post growth.
Concerns are being raised about the non-performing assets (NPAs) of the public sector banks. How serious is the situation?
The present situation of NPAs is a major concern for everyone in the banking sector. Sectors like power, cement, steel, auto components have turned weak. These sectors may take longer time to get on the right growth path in the present macro-economic scenario. Also, construction, real estate, cars and trucks are some segments where we see slow growth in the coming times. As a bank, our NPAs have remained fairly better than the peers with gross NPAs at less than 3% and net NPAs at less than 2%.
How is the scenario in the restructured loans in the first half of current fiscal? Do you see them rising in the remaining part of the year?
Restructuring doesn’t need to be considered bad. Yes, they are high at present. But that is to save the businesses and not letting them to become a NPA. We see restructured loans to be high in the coming months as well. But that should not be read as bad for a bank.
What are your growth projections in the current banking scenario? From where do you see more growth coming?
We are the second largest bank in the country. Even in the current scenario, we expect to grow at around 20-22% of annual growth and become Rs 10-trillion bank including global business in 24 countries by the end 2013-14 from Rs 8 trillion reported last year. We expect advances to grow at around 18%, which is around 2-3% above the industry growth. For sustained growth, we have slightly increased our focus on sectors like small and medium enterprises (SME), agriculture and retail and reduced our exposure to mid-corporate.
