BoB to keep Rs 120cr for provisioning restructured assets

The Reserve Bank of India raised the provisioning on restructured assets to 2.75 percent from 2 percent earlier. The central bank also cut cash reserve ratio (CRR) by 25 basis points to 4.25 percent. RK Bakshi, ED of Bank of Baroda said their total restructured assets at the moment is around Rs 16000 crore and according to the new rules, they have to set aside Rs 120 crore.

The CRR relief will provide the bank around Rs 700 crore, informed Bakshi. He further added that a lot of easing has taken place on the retail side and NPLs and restructured accounts have been better.

Here is the edited transcript of the interview on CNBC-TV18.

Q: What is Bank of Baroda's aggregate restructured assets and therefore, how much will you have to set aside?

A: Our restructured assets are in the region of around Rs 16000 crore. So our additional setting aside will be around Rs 120 crore.

Q: And how much money would you have made because of the CRR cut, will that match this Rs 120 crore payout?

A: It will be almost half of that. But, if you have to provide Rs 120 crore for one time and CRR is for full year. However, we have less than half a year left.

Q: What is the CRR relief that you are getting?

A: That will be around Rs 700 crore.

Q: Is there any room for cut in your actual lending rates given what the RBI has done? Everyone's pointing out that CRR now is at a decade low and we have had significant cuts. Do you think there is a possibility that we could have atleast a 50 basis points cut in the actual lending rates in the next three to five months?

A: The actual lending rate comprises of two components, one is the base rate and the other is the spread. There are various segments which are requirements. The retail section is already seeing quite a lot of competitive easing or that was the sector which was having some credit growth. There has been a lot of competitive easing.

The major cost in bankers' books is the cost on deposits and that floor is determined by a number of factors including inflation, including competitive pricing by government saving schemes, provident fund schemes and the need that suddenly you should not become too tight on liquidity. The banks have tried to reduce the rates of interest on deposits a little bit but I must say that on the retail side, on the asset side, reductions have been even more than what has been reduced on deposits.

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