Bank of India Eyes Stronger Corporate Credit Growth in H2, NIM Likely Bottomed Out
India’s largest lender by assets, Bank of India, is gearing up for a sharp rebound in corporate credit growth in the coming quarters, even after a slowdown in Q1 earnings.
According to Rajneesh Karnatak, Managing Director and Chief Executive Officer of Bank of India, the lender’s robust credit pipeline and loan sanctions at the last stage have bolstered his confidence.
The public sector bank’s corporate loan book grew over 4% on-year to Rs 2.37 lakh crore in the June quarter, driven by competitive market rates from AAA-rated borrowers and the bank’s conscious decision not to lower lending rates to preserve margins.
However, Karnatak attributed the growth to the credit pipeline, which remains healthy, with strong traction from sectors such as data centres, electric vehicles, and green finance.
He expects a pick-up in investment activity from September and a resolution on the bank’s exposure to MTNL, a stressed state-owned telecom company, within the next three to six months.
The bank’s global loan growth target for the current financial year remains at 12–13% and global deposits at 10–11% on-year, with retail, MSME, and agriculture continuing to be important growth segments.
On the retail side, the bank is focusing heavily on secured lending, particularly housing loans and loans against property, with a strong focus on salaried-class housing loans and LAP, where asset quality is better.
In terms of asset quality, the bank reported some pressure in the agriculture and MSME segments, with slippages of around Rs 1,000 crore in Q1. However, Karnatak expects the numbers to be more controlled in the coming quarters.
On margins, the bank believes it has reached the bottom, with the global net interest margin standing at 2.55% as of June-end, down from 2.61% a quarter ago. The decline was due in part to the bank’s international portfolio, where margins are structurally lower, and also due to the swift transmission of repo rate cuts on the loan side.
However, Karnatak expects the NIM to improve from Q3 onwards, driven by the bank’s efforts to reduce deposit rates and the Reserve Bank of India’s recent decision to reduce the cash reserve ratio, which is expected to release around Rs 8,000–9,000 crore for the bank starting September.
The bank does not foresee any further repo rate cuts and is aligning its rate strategy accordingly. A recent savings deposit rate cut from 2.75% to 2.5%, impacting over Rs 2 lakh crore in balances, is expected to help lower the cost of funds.