Bank of Baroda Ltd

NSE:BANKBARODA

Q4-2025 Earnings Call

[Operator]

Good morning, everyone. Good morning, and welcome to the analyst meet for Bank of Baroda's financial results for the quarter and year ended March 31, 2025. Thank you all so much for joining us.

We'll start proceedings with brief introductions. We have with us today our MD and CEO, Shri Debadatta Chand, and he's joined by the bank's Executive Directors and our Chief Financial Officer. Chand sir, would request you to start proceedings.

[Debadatta Chand, executive]

Yes. Good morning to all of you. And again, just to introduce the management team. I'm D. Chand, I'm the MD and CEO of Bank of Baroda. On 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 is Mr. Lal Singh, who is Executive Director, looking after the MSME on the recovery and also the HR function of the bank. To my left, Mr. Sanjay Mudaliar, who is 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 is Executive Director looking after all platform function compliance and control and also the retail liability. And to the further left, Mr. Manoj Chayani, he is the CFO of the bank.

So with this, there is a presentation, right?

[Operator]

Thank you, sir. Yes, I 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?

[Chayani Sundar, executive]

Respected MD sir, Executive Directors and esteemed analyst friends, good morning to all of you. It gives me immense pleasure to welcome you all, pursuing interest in Bank of Baroda. And after such a long time, we are holding this analyst meet physically.

So I will be presenting a few highlights of financial year '24, '25, Quarter 4, '25. And as far as the financial results are concerned, '24, '25 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'll move on the slides, I will explain, we have posted highest ever profit on a consol basis as well as on the stand-alone 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% to 13%, and our asset has grown by 12.8%. And the fact I would like to bring to your kind notice is that the domestic advances has 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 has 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 Loans, 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% to 11% growth. I'm happy to say that the total global deposit has grown by 10.3% with international 15.8% and domestic 9.3%. Here 2 aspects, I would like you to note that our CASA growth is 6.4% Y-on-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 will be maintaining at 40%, and it is at 39.97%.

Coming to the quarterly profitability. Operating profit, we have posted INR 8,132 crores. Profit after tax for the Q4 is INR 5,048 crores. Please note that during the whole financial year, we have posted a profit of INR 5,000 crores twice in the year. Return on asset is consistent, and as we said for last 11 quarters, we are posting return on asset more than 1%, and it is 1.16% as of 31st 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 crores, and here, the consol PAT, we have exceeded INR 20,000 crores, INR 20,700 crores to be very precise. As we said, operating profit, INR 32,435 crores, which was earlier INR 30,900 crores. Similarly, return on asset, we are maintaining more than 1% and return on equity at 17%.

Our margin, 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. So as a result, our quarterly NIM has declined from 2.94% to 2.86%. Few basis points because of the repo cut and a few basis points because of the -- your day count for the March quarter. And as a result, but -- as we always said, we'll be maintaining the NIM more than 3%. Our closing NIM as of 31st March is 3.02%.

This slide, I will take a little time to explain you how we have generated value for the shareholders. As you can see, for the last 5 years, there is a consistent increase in the book value for the share, which was INR 106 which has now gone up to INR 223, which is substantial increase in the value per share. Similarly, earnings per share has gone up to INR 38, and you will 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 '24-'25, subject to approval by the competent authorities, and we enjoy a government parentage 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 you look at the slippage ratio, slippage ratio is also trending down from 1.12:1. As we said, our slippage ratio will never exceed for financial year '25, 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% to 1.15%, and which we are well within that limit.

Credit costs, 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 up 0.33%, and our collection efficiency is at 98.5%. The bank enjoys a strong capital base of 17.19% CRAR with Tier 1 ranging to 14.79% and also we are having a healthy LCR of 123%. This is the highlight for '24-'25.

Now I would request MD sir to give his welcome remarks. Thank you, sir.

[Debadatta Chand, executive]

Thanks, Mr. Chayani. And as the presentation captures everything with regard to the numbers for the bank, let me make a couple of qualitative comments vis-à-vis the performance. And one basic business model for the bank till today has been the consistency.

If we look at our performance for last 10, 12, 13 quarters, whether it is a top line number, whether it is a bottom line number, one of the basic theme of which the bank working on is the performance consistency. More importantly, the stability aspect of the numbers and also backing up everything within the bank to make it fundamentally strong.

Just a couple of numbers, which again in terms of the domestic advanced 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%. So in terms of guidance that we had given earlier, both the deposit and advances, deposit we said earlier will grow at 9% to 11% and advances at 11% to 13%. So 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.

And any other -- I mean guidance we had given, whether it is slippage ratio, credit cost, ROA, and more importantly, the margin, I'll talk slightly more on the margin side. So we have come through to the guidance all along whenever we give a guidance. And last quarter, I revised the NIM guidance by 5 bps and the market reacted, obviously so, but the idea was to come true on the guidance.

And as on -- if we look at the 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 and one slide which we included this time, the value to the shareholder. If you look at the book value, FY '23, it was at INR 148.8. The book value as on FY '25 is INR 223, so almost INR 75 of book value, we have added in 2 years' time, it was almost at INR 148, you look at almost 50% increase vis-a-vis the book value, it was in FY '23.

The dividend has been very consistent, possibly one of the highest dividend yield vis-a-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 theme the banks look at to make the bank fundamentally strong. While consistency, stability is important contour of the bank's business model, but the idea is to make the bank fundamentally strong. And I think that's the value the shareholders, I mean, have realized and possibly need to realize on that.

On the operating performance side, yes, the NII growth is a muted growth. We would wish 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 still was elevated impacting the Q4.

And 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. And I don't know how many banks are giving the data of saving and current separately. Our savings growth is almost at 5% and that's a retail saving that we are talking about, right?

So secondly, earlier also multiple times I said earlier, the dependency on the bulk, we want to reduce it. And just to give you a data point, the outstanding bulk deposit as a percentage of total deposit. I mean it was somewhere at 8% in FY '22. It went up to almost at 16% in FY '23. As on June '23, it went up to 20%. And as on today, it is almost 1 year, 9 months, we are still at 20%. So we do not want the expansion of the balance sheet by raising bulk deposit and that is 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 noninterest income has been strong this year. And just to give a sustainability of the noninterest income, I say there are 2 items, which help us. One is the treasury income and other is a recovery out of TWO accounts. The treasury income has been better this year as compared to last year, almost INR 600 crores. And going by the current market condition on bond market or the rate side, I believe this year also going to be a good year for treasury. Similarly, on the recovery out of the TWO, our normal run rate earlier also, we said it's almost like INR 750 crores to INR 800 crores. And every year, we see there is a one-off coming out of NCLT regulation or some other account. So last year also, we had one-off. FY '23-'24 also, we had one-off. So with a run rate of around INR 750 crores, INR 800 crores, I think again, this year is going to be a one-off, 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%. And 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 continue 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 bps higher than that of last year. And earlier also said we -- corporate we want to grow at 10%, and this year, it is 8.6%. But I hope liquidity back into the system now, we can grow at 10% for this year too.

One of the number, which again should invite when I talk about the fundamental strength of the bank is the percentage of CASA ratio. We're 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 depositor vis-a-vis the capital market. But 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. We -- as you know, that we last year got Mr. Sachin Tendulkar as the brand ambassador for us and coming out some curated products vis-a-vis the deposit. So I think because of our innovation in the space of the deposit market, the bank is able to do good in both retail savings and also on the retail term deposit.

Two points I would like to, again, slightly possibly all of you would like to know that got the coverage that I would see after announcing the financial results vis-a-vis the market reaction. One is on the margin front and other second is on the slippage front. So will 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. And precisely for that reason, we reduced the guidance by 5 bps, earlier the guidance was 3.10, plus minus 5 bps. We revised that to 3.05 plus minus 5 bps.

At that time, the market reacted also with the changed guidance, but the idea was that we would come true on the guidance. And 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 2 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. And domestic NIM is 3.18%, and 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 #2. We are one bank for a full year having a NIM in excess of 3%. But again, our business composition is 16%, 17% international book. And that's why if I only compare the domestic, possibly it would be one of the highest. And 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, market -- I mean my NIM has to react to the market condition.

I suppose the market, you know there is an elevated cost structure and my NIM is not reacting, that means something, either I'm 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 thing while trying to drive on the business. So 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. And 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 the NIM guidance for full year '25, '26. We said we're not going to give a full year guidance now, the reason being the market is at a very inflection point. Why? repo rate already has been cut by 50 bps. And the cut of the repo rate within this Q4 itself is almost 3 bps and going to be for the full year will be much higher.

Similarly, the liquidity scenario that was prevailing in Q4 has changed in Q1. So 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 and the repricing of these deposits started at a much lower level, around 30, 40 bps lower as on today. If you track the certificate of deposit market, you can very well know that the wholesale deposits, the rates have gone down.

On the retail deposit front, we have reduced the peak rate by almost 15, 20 bps, and possibly with the further moderation happening on the liquidity and the rate stand, possibly these rates again would be reduced further. But then, as you know, on the floating rate advances, the impact comes immediately. Deposit impact slightly takes a lag effect. So 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 should slightly take a longer time and possibly it would catch up somewhere in the latter part of Q2 or Q3.

So we are expecting a much better NIM somewhere in -- maybe to some extent in Q2, but Q3, Q4 would be definitely much better. And my sense as on today, although I'm not giving you 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.

So 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, on the liquidity changing between Q1 over Q4. So there can be some kind of 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-wise, point-wise. The slippage that we are looking at, the GNPA, net NPA are the best in 13 years. And what is good part of Bank of Baroda's 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 very strong that the asset quality of the bank as on date is one of the best in 13 years, point one. There are 2 other data 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. And within this year itself, 2025, the recovery is higher than that of slippage. Again, I repeat the 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. And within the same year, that means '24, '25, the recovery is higher than that of the slippage, excluding the write-off that happens in the book. I'm only talking about the NPA recovery and the TWO recovery that the data is here in terms of movement of NPA.

And even if considering the Q4 only, which some of you or the market reacted, the Q4 slippage is INR 2,850-odd crores, Q4 '25. And the Q4 '24 slippage is almost at the same level, INR 2,850-odd crores, 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 crores to INR 2,800 crores. But again, look at another data there in, I'm coming to the quarter comparison, the recovery is also higher than more than INR 300 crores 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 in March 2024 was 98% and March 2025 is 98.5%, obviously, excluding agriculture data that we provide to all of you.

So 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. And absolutely, there is no concern with regard to any incipient or any inherent, what you can say, slippage or anything stress building in the book? Absolutely, no doubt should be on that.

And going forward also, and you could have seen that we gave 2 guidances. One is the slippage ratio and other is with regard to the credit cost. Our guidance for the slippage was 1% to 1.25% and slippage credit cost was less than 0.75%. Normally, you factor in building in a model form, right? And consistently for all 4 quarters, our numbers is way, way below this guidance. So absolutely, there should not be any doubt with regard to the asset quality of the bank. Yes, there are a couple of buckets like suppose you said on MSME and Retail, there is some incremental INR 300 crore, INR 400 crores or INR 500 crores of increase. Look at corporate, there is a INR 2,000 crores fall also on the slippage. We can't have a book wise -- you need to look book as a whole rather than a book-wise and then possibly take a call on that.

So with this, I think we had one of the best quarter in terms of both top line, bottom line and also on the asset quality. These are the 3 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 2 years, more than 2 years. Thank you for sparing your time on a very eventful morning, rather, very, very eventful morning. And I think all question and answer, the management would be here, including me, and it is to clarify all your doubts. Thank you very much.

[Operator]

[Operator Instructions] 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. [Operator Instructions]

[Unknown Analyst]

Sir, I had a couple of questions. Firstly, on the write-off. So which sectors do the write-offs relate to? Of course, they all appeared to be very small loans, but with sectors, was it MSME? Was it personal loans which are the main sectors? And is that the reason why credit costs also would have gone up quarter-on-quarter? That was my first question.

[Debadatta Chand, executive]

Sure. On the write-off, actually, there is a write-off policy of the bank. It's typically on the write-off kitty, there are again, recovery happening and there are fresh kitty, we are adding there in. The write-off normally doesn't happen on a segment of advances. It goes to all segments and mostly into large corporate, we're already 100% provided. There is hedging over there. It happens also 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 segments. And this year, if I look at INR 8,500 crores of write-off, mostly, it has gone to the larger accounts rather than small accounts on that. And these are sufficiently hedged. I mean there is a sufficient time of this account getting through and also 100% provider since law. Anything, Lal Singh Sahab you want to add?

[Lal Singh, executive]

No, sir.

[Unknown Analyst]

So basically, the quarter-on-quarter increase in credit cost is not attributed to write-offs. It's just a normal provisioning.

[Debadatta Chand, executive]

It's a normal provisioning.

[Mahrukh Adajania, analyst]

Okay. And sir, any reason why MSME slippages would have been higher Q-o-Q?

[Debadatta Chand, executive]

No. See, that is what I say. You need to look at a full year. Actually, there are 2 other factors. When I am growing MSME at 14%, 15%, the denominator is also increasing. But you need to be mindful is what is the slippage ratio there. So as far as MSME book is concerned, if you look at the journey for the last 4 or 5 years, post COVID, obviously, the NPA was quite high. But as on today, I mean, on the GNPA on MSME is much, much lower on that. That is point one.

Secondly, there will be some slippage happening every -- we are running a large book. There will 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 our MSME accounts, we are also putting a product like cash management, the bank's own cash management application with the MSME account, so that 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 INR 300 crores, INR 400 crores, INR 500 crores of MSME, this normally happens based on selected geography, some of the hedging accounts, of which there is a weakness. So it's no way impacting the overall slippage ratio. The overall slippage ratio is contained, including that the slippage ratio of MSME also is contained.

[Unknown Analyst]

Got it. And sir, just one last question on margins. So you alluded to the fact that 3 basis points came from repo rate. So the remaining 5 basis points would be day count, do you think or...

[Debadatta Chand, executive]

There is impact on day count, which the CFO alluded to. We follow more conservative day counts as compared to maybe a couple of comparisons that he has in mind. But the fact of the matter is that there is a bit of deposit cost that impacted us in Q4. And precisely for that reason, we revised the guidance earlier. Rather, I was proactive in revising the NIM guidance by 5 bps thinking that a 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 it's going to be much better in Q3 and Q4 because our deposit repricing would happen at least in 6 months' time, and that is going to give us the upside there.

[Operator]

Sir, if you can just introduce yourself first.

[Ashok Ajmera, analyst]

Yes, I'm Ashok Ajmera, Chairman, Ajcon Global.

[Debadatta Chand, executive]

You're one person who doesn't require any introduction.

[Ashok Ajmera, analyst]

No, but she wanted anyways. So compliment, sir, one of the highest operating office in the quarter, I mean INR 8,132 crores is not a small profit and 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 with the noninterest income. And in that, also the treasury has played a very, very important role, which every one of us know. But in our case, it is proportionately a little more higher the other income, which has contributed to the overall operating profit. So going forward, in the freight cut scenario, 50 bps or 75 bps or whatever it is, and you said that the NIM in any case, you will try to maintain that 3%, which is already there. So 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? And how do you -- so this is my first question.

Second, sir, connected with this INR 490 crores in this profit has come from an unusual item, which is the SRs revaluation. The NARCL government guaranteed on the back of the RBI decision, then I think it has been done on 31st March itself, when the SRs which were at INR 1 or 0 have been valued by adding to the profit of INR 490 crores. So that also has become the part of this profit. So 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 at the valuation for valuation. So one comment on that because this has been an important, I mean, INR 500 crores has gone straight to the bottom line.

And one more thing, sir, which we have been observing in Bank of Baroda, though you said, I guess it is one of the best bank. Most of the other banks in that family pension where the 5-year dispensation was given by RBI, they have not taken that option. And they have all written off the entire amount in the book. But in our case, we are still maintaining that lag effect. I think INR 290 crores still have been -- so 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.

So as a prudent measure, we could have just written it off because this is, I think, probably I have not seen in some of the other banks, which are -- I think they all written off the entire amount. So this is the other point which is there.

And finally, sir, now although 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% to 16%, only revision was at the lower end of the target, but still they faltered. In my report yesterday released 12%. So even from the lower end of the target given, also they have faltered by another 2%. And the reason given was that recovery from some of the corporate -- large corporate and government backed corporates because they had raised capital from the markets. So in our case, also, was there any similar situation which is kind of one-off, which has affected or rather restricted our corporate credit growth also. So these are the few observations and questions, sir.

[Debadatta Chand, executive]

I forget because you had a couple of questions. So 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 3 years, the change has started happening in Q1 over Q4 that we had last year. So the margin pressure continues to be there for Q1. That is what again, let us be very clear on that. But on a full year basis, again, possibly most of the banks will be able to because the ALM management is such wherein banks do intermediation, right? So they need to protect their margin. .

So in a full year basis, my sense as on 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 at this point of time. We're possibly in a position to give a full year 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 that's getting repriced because repricing is very easy, but let us be mindful of the underlying condition why do people move to the capital market rather putting money in deposit. So I wish that I can reprise all my deposit at quick go depending upon the repo cut, but then I need to look at the underlying market. So there are challenges over there.

The margin pressure continues to be there, but I expect Q3 -- Q2, Q3, Q4, we'll pull it up. And full year margin, my sense as on today, which again will confirm after June quarter that whether banks are going to maintain this margin or not, but I'm 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 expense is almost at 13%. We could optimize on operating profit because our net interest income is strong at 15%. There are 2 elements that we talked about that I'm going to respond now. One with regard to we had additional INR 500 crores, INR 600 crores of profit on sale of investment in this year as compared to last year. And going by the current outlook on the rate cycle, possibly on 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 is also the same way it is valued, suppose you are provided for fully for some proactive and there is an NAV which is higher than we need to, again, account for that.

So the benefit is going to continue there in the books itself. So I don't see -- because if you look at this element, there is no incremental. There was a write-back of almost INR 500 crores last year, and there is a write-back of almost INR 450 crores this year on the depreciation front. And going by the rate cycle, I think that, again, would be a right way going forward because 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. And our normal run rate on recovery of TWO is roughly around INR 750 crores to INR 800 crores. With every year, we are seeing one-off giving us INR 1,000 crores, INR 1,500 crores, INR 1,800 crores kind of a one-off. So this year also, if we normalize the recovery out of TWO, it would be roughly around, let's say, INR 3,200 crores on a normalized run rate, plus a one-off putting us at almost the same level like this year. This is what sense on the -- it's almost INR 60,000 crores as on today.

The third aspect that you talked about, I just forget that can you just -- corporate credit and then fourth is the pension. On 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 I suppose you want to grow higher, you can very well grow higher. But then again, on a margin stake, 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% to 13% were higher than 13%, the global at 13% and the domestic at 13.7%. So our retail is growing 20%, which is again, 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. Our -- we have a small base, the growth is higher. MSME agri started growing at a good pace of 14%. Suppose I grow corporate at 10%, I'll be very easily hitting the mark of 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 even my sense. Given a scenario of that liquidity available, possibly we can upsize more than our guidance on the matter. So as on today, I'm holding my guidance of 9% to 11% on the deposit, 11% to 13% on advances with the understanding that if the liquidity prevails, the surplus liquidity, possibly we are going to upsize both the guidances. Pension can...

[Lal Singh, executive]

Ajmera Ji, you're absolutely right in saying that. It's a prudent call taken by the management as for the RBI guidelines. In any case, that dispensation is going to be over in the current year itself. So...

[Debadatta Chand, executive]

On INR 20,000 crores of net profit, INR 290 crores is not -- yes. And it's a good suggestion, actually. It did strike to my mind. Otherwise, we could have taken off.

[Operator]

We'll take a couple of questions from you. If you can please raise your hand.

[Parameswaran Subramanian, analyst]

Param Subramanian from Investec. Sir, first question is on the NII growth, right? So this quarter, we've grown our loan book, our deposit by between 5% to 6%. And the absolute NII is down 3.5%. So 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? So simplistically, that's what it seems to indicate and 8 basis point margin decline doesn't tally with that? So that's my first question.

[Debadatta Chand, executive]

Yes. So 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 -- like your balance sheet expansion deposit -- I mean, advances you were 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 a slightly lesser growth in June, slightly higher growth in September, almost a good growth in December.

So the impact of the full quarter when you raise deposit at -- 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 deposit, which would have mobilized prior to December would have full quarter impact in the March quarter. So because of that, the margin got impacted, the NII growth has been less. Actually, if you look at the income growth is almost -- and looking at the lag time in terms of the curve of both asset pricing and liability, many of the -- actually looking at cut in the overall market scenario, the asset pricing started reacting to those anticipated cut and the things went down, particularly, right? So the ability to command a better price on the asset was limited in the December quarter itself.

So the NII growth is 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. And I think it's entirely in line and sync with the market actually, if you look at. Somebody would have a Q3, the impact would have come. Some banks 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 elevated NIM 2.94% in Q3. I took a cut in Q4. So slightly -- how do the lag -- the curve plays out, that is important. Anything you want to add on this.

[Parameswaran Subramanian, analyst]

Sir, on the interest income, right, so you said there is some day count impact. So can you explain that? Is it on interest accrued, there is an impact?

[Debadatta Chand, executive]

No, no, there is -- as far as we are concerned, we're 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 days count convention is the same for across all asset class. Is that -- Chayani?

[Chayani Sundar, executive]

Yes, absolutely. Only day count in the sense is that 92 days versus 90 days, that's all.

[Parameswaran Subramanian, analyst]

So because the other banks have explained, it has a positive impact on margin, reported margin.

[Debadatta Chand, executive]

So they have a positive, I do have a conservative...

[Parameswaran Subramanian, analyst]

Okay. Maybe I'll take that offline. Sir, when you said that NIM guidance, I think you expect largely to be flat in FY '25, first dipping in Q1. Are you talking about versus this quarter 4 NIM? Or are you talking about full year?

[Debadatta Chand, executive]

Full year. We compare full year to full year. And secondly, let us also understand one thing because, see, we're running a bank and then you are analyzing as an 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 get -- I mean, I would have heard somebody's comment that the banks need to reduce their cost to income significantly to maintain the profitability. That's the 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 2 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. So we moderated personal loan book 2 years back we announced. We were the first bank to announce we're going to moderate on the personal loan. The issues came 1 year later.

So as I said that while having a growth margin trade-off, what again I'm mindful of is the asset quality. And 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.

[Parameswaran Subramanian, analyst]

Okay. Sir, one last question. So on 20%, you said you have bulk deposit.

[Debadatta Chand, executive]

20% of total deposits.

[Parameswaran Subramanian, analyst]

Yes. So the pricing lower will happen immediately in Q1 and that will give some...

[Debadatta Chand, executive]

No, no. Actually, the book is almost 70/30 bulk and CD together. And bulk is 1 year, CD is almost 3 months to 6 months that you can take. So average duration can be 9 months, you can take it. So 1/3 of the book would get repriced in this quarter and something already happened at 50 bps lower in this quarter itself. Anything, Mr. Chayani, you want to add?

[Chayani Sundar, executive]

Yes. 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, and 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.

[Piran Engineer, analyst]

This is Piran Engineer from CLSA. So firstly, your guidance, deposits growing 9% to 11% and loans 11% to 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.

[Debadatta Chand, executive]

So there are 2 things here. As far as LCR is concerned, we'll operate at 120% level, right? And 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 on today. I can very well switch asset within the excess SLR to make my HQLA higher, that's point one. Secondly, while managing asset liability, I mean, we also rely on borrowing whatever the funds are available at a cheaper funds than we go there, we raise infra and others last time. So there are multiple options available to manage the LCR, but our comfort on normalized LCR would be around 120%, that is we'll aspire to do that. I mean sometimes people say that maintaining 120% is slightly maintaining high. But I think as a prudent liquidity management, we'll maintain at almost at 120%, right?

[Chayani Sundar, executive]

So our internal take always remains that we should operate in excess of 120% or around 120%.

[Debadatta Chand, executive]

The other factor, which again, you can talk about is the CD ratio possibly, I mean, with the guidance that we gave. So we said earlier also, we are comfortable maintaining CD around 82% to 84% level. That's why actually the international growth, we are moderating one reason because that puts huge pressure on the -- because they have almost 100 CD ratio. So earlier, the international growth used to happen at 25%, 30%, 35%, now it is almost less than 10% or aligned with the corporate growth. So 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.

[Piran Engineer, analyst]

Fair enough. And sir, in our EBLR book, do we reprice on T+1, what is our methodology?

[Debadatta Chand, executive]

It's actually, in fact, automatic, but then the ALCO is the competent pricing. So the moment there is a repo cut, next day we have the ALCO to announce. That's why it is T+1, right? Anything you want to say? It's T+1 just because the ALCO is the component body to do that, so announce it on the next day. The benefit goes on T0 or no. The benefit goes on T+1.

[Operator]

I think we have a question behind. Is there anybody here?

[Rikin Shah, analyst]

Yes. This is Rikin Shah from IIFL. I had a question on margin, and I wanted to break it in 2 parts, the domestic and the international. So even if we look at the domestic yields, they have been sliding down in the last 2, 3 quarters. And especially if we compare vis-a-vis the largest SOE bank, they have been able to maintain it stable. So what kind of assets we are kind of lending to where we are seeing so much of yield pressure, especially when the rate cuts were not there?

And the second part is on the international side. So here, we have a pretty balanced loans and deposits from overseas, broadly 16%, 17% vis-a-vis the other bank, which has only 4%, 5% deposits coming from the overseas. So ideally, I would have thought that we would have been able to show a better international NIM trajectory vis-a-vis them. But again, our international NIMs have declined more vis-a-vis them. So why is that happening? So those are the questions on NIM.

And the second part is just on the MSME,while it's 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's coming from?

[Debadatta Chand, executive]

See, I'll 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, 2 years back. And from 3.32%, it has gone down to 3.18%, and all of us do understand that the deposit market was very tight last year for multiple regions. One is that the normal retail deposit also, the peak rate upward was almost at [ 730 ], many of the banks offered at [ 730 ]. So there was an increased cost happening over there. Obviously, when the deposit underlying market has an elevated cost to put pressure on margin. And I'm happy that I'm running 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 the current scenario of downward cycle, I should be much more positive on that, right?

So we'll reap the upside on that. At 3.18% also, let me again say that if you compare to 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. So our NIM level is not the issue, the issue that possibly all of you, again, was this changed that happened? And my sense is that the change happened for a genuine underlying cost structure in the deposit market. And now since things have changed, I'm much more optimistic that it should happen going to be for the full year. But again, Q1 would be still a challenge because the deposit resetting would happen with a lag. So that's the domestic part of it.

International NIM, we run a larger book on the international almost 16%, 17%. We -- I don't know if you look at 2, 3 years back, the NIM of international was very low at 0.47%. In 3 years' time, it could optimize to 1.97%. At one point of time, December, we crossed 2%. But international, what has happened, the rate cycle, the changes happened almost around 6 months prior to what is happening in India now.

So 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, but then the NIM is going down, the international, you can't. And the international NIM is almost like 60% of the domestic NIM. And since I'm 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% going to be impacted global NIM much more as compared to the other bank. So that is what the issue that I want to highlight.

[Rikin Shah, analyst]

Sir, if I can just 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. And the loan yields have been going down in the last 2, 3 quarters in an environment where there was no rate cut. So why was that happening? And in the international, while I accept your point that we run a 16% loan book which is overseas, the other bank also is broadly similar. The deposit is a much higher proportion for us.

[Debadatta Chand, executive]

I got it. I got it. So we run one of the largest corporate book. I mean my corporate book is [ INR 400,011 ] as on March. In December, it was less. And on the international, I'm running a corporate book of almost INR 2 lakh crores. INR 6 lakh crores is the 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, much lag after to the BRLR that happened immediately with the repo rate hike. And the lag effect is almost 1 year to 1.5 years. And 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. So the asset repricing at a level happened at a different point of time. And once it achieved that level, then it was plateaued at that point of time. So the yield on advances for most of the banks, I don't have a proper number now. But I think it has gone down across, right? So it's not only specific to Bank of Baroda. So in that sense, I don't think there is any [ aversion ] over there. Actually, it is in line, in sync with the market.

[Chayani Sundar, executive]

So I think I can add another thing is that 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. So 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 fine -- highly rated corporates were expecting fine rates because they have the option either to go the loan market or to the debt markets.

So some of those reasons played out in terms of absolute moderation at the top end. And that's how somewhere we tried to moderate the corporate growth to save some. Someone was asking the 10% growth and 9% growth. INR 5,000 crores here and there, we would have been there at 10%. So that kind of the top end book was giving that kind of impact.

[Debadatta Chand, executive]

Would like to talk about that. What is the composition of the book in MSME that you already [indiscernible]?

[Lal Singh, executive]

So 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. So we presently focusing on the [ CBCME ] segment, the supply chain finance segment, then we have innovated the product cash flow-based lending, smart or draft limits. So these are the segments where we are started focusing. As far as the MSME NPA, which you are talking, which is despite in the last quarter or last year, that is in the legacy accounts.

And as far as the NPA as a whole is concerned, I think Bank of Baroda's MSME book is quality book and we are having below 8% of the NPA, around 7.5% NPA and MSME book as compared to 17%, which had been in 2021. And all other banks especially this is the lowest NPA in the MSME. And this is a sector which gets affected immediately. If there is anything happens anywhere, this is the weakest segment which gets impacted immediately. So I think this book is well quality book, and there is a good growth in this book. And Government of India is focusing on this segment in a big way. And I think we are part of the economy, and we are focusing on this book and Government of India has provided many schemes, many great loyalty schemes in MSME. So I think MSME is going to grow with a good speed and the book is protected from any of the slippages.

[Debadatta Chand, executive]

Just to add to him, the change definition of MSME, which we announced recently, is going to give a huge upside on the growth. And there's typically a mid-corporate accounts getting into MSME because of the change definition. So that's one focus area. Secondly, as you rightly said, [ CBCME ] where it was never a cup of tea for [indiscernible] for banks. But for Bank of Baroda for the last 4, 5 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 price in terms of return they are in. So in terms of the contour of the book, we are going to focus on the main core MSME with a cash management product that gives a better control. .

We're going to focus on the new mid-corporate accounts by change definition is going to be MSME. We're going to focus on 2 products where we do have a huge expertise now of having done that -- those products for 4, 5 years now, [ CBCME ] and also on the supply chain side. I think that all of the 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.

[Operator]

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 G-sec rates?

[Debadatta Chand, executive]

Yes, Sandeep, for spread resetting, there is guidelines by the regulator, and it happens after 3 years only. And there are a large number of accounts where spread change has happened only at the time of renewal. So 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. And if there is a deterioration on either internal or external, obviously, the credit spread would change and giving some upside on that.

On the retail side, again, similarly, many of the scheme rate, there are protections available even if on the repo rate side protection available and a couple of schemes where after 3 years, we can again reset the spread. So it's a combination of multiple transactional thing, not as a policy we can say. But yes, with a downward rate cycle, the change of spread can be one way to protect the margin, and we are mindful of that.

[Operator]

The second question is from Manoj Alimchandani. He has two questions. Please share your thoughts on the outlook for the treasury desk performance with one of the best treasury desks, and please share we share on AI and technology initiatives and operating leverage benefits of technology.

[Debadatta Chand, executive]

Thanks Manoj for asking this question. First question, Mr. Chayani can you just answer the outlook on treasury?

[Chayani Sundar, executive]

So in fact, last year have 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. And I believe that in terms of -- we have another objective of maintaining the wholesale book cost trending down. Again, there will be a good improvement this year also. So overall, treasury will continue to give good performance in terms of profits as well as maintaining the cost.

[Debadatta Chand, executive]

Mr. Mudaliar on the AI and technology.

[Sanjay Mudaliar, executive]

Yes. So 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 products, we are looking into the -- creating some kind of resilience in the system. And 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.

And AI has been very extensively used for both the purposes for building our internal resources as well as customer service delivery points. So both the sites we are well covered, and we have been doing quite a few innovative products on both sides.

[Operator]

Last question online from Ankit Bihani. What is your loan mix, repo, MCLR and fixed rate?

[Debadatta Chand, executive]

You have the composition, Chayani?

[Chayani Sundar, executive]

So our repo-linked book is 34%, 35%. MCLR-linked book is anywhere between 45% to 48%, plus/minus 2 percentage points. Fixed rate is not very large in a very low single-digit percentage.

[Operator]

I think you have a couple of questions. I think, yes, right on the front row.

[Sushil Choksey, analyst]

Congratulations for stable trajectory. Sushil Choksey, Indus 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, CB, 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?

[Debadatta Chand, executive]

No, that is what I said on the RAM book, we almost added 190 bps in the last 1 year. March '25 over March '24, 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 3 years' time, by adding 200 bps every year, we want to achieve 66 in fact. And that would give me a bit of a diversification benefit on the RMAM 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%. And mind it, we are running one of the largest corporate book in the entire country now. I mean, in terms of public, private together, maybe we're at third, within the public, we are the second. And if I add my international book, which is again corporate, [ sanction ] from corporate office, the book is almost INR 6 lakh-odd crore. So there, the growth guidance, we'll 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 concept. We have called account planning, capturing 360-degree relationship. There are teams dedicated and engaged over there.

We created a skill on underwriting. We have hired experts -- industry experts for advising us on the matter. So we are creating also capacity. So corporate continued to grow at 10% plus. At the same time, RAM has to grow on average around 15%, putting something on a 200 bps change on the RAM book vis-a-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's there for long. I mean they also optimize the time they find that is attractive and then they go for that market. And the moment they find almost at while there are distinct advantage or somebody availing a loan because you can tap that loan at any point of time, not like a bond, to issue a bond, bond there are hidden cost in terms of the issuance, blah, blah, blah, maintenance, which the loan market doesn't. It will continue. We're comfortable with operating in both markets and supporting the corporate on that.

[Sushil Choksey, analyst]

So my question was more how many rate cuts are you expecting from RBI this year? And where do you see G-sec specifically in India? And 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?

[Debadatta Chand, executive]

Our house view is that there may be 2 more cuts by March 2026. That means 50 bps we are expecting? On the G-sec already because as you know, it's a lead indicator, reacted already to a couple of cuts going forward. The best case scenario, G-sec looking at 6 quarter. Currently, it is almost at 6.36% or 6.40% kind level. Our book is well positioned on the treasury vis-a-vis suppose it happens at 6 quarters. The trading profitability of the book is much stronger because huge HTM book we have, where one bank, if you can mind it, there is an item in the balance sheet, if you can closely follow vis-a-vis other banks, was running AFS reserve almost to the extent of INR 2,000 crores. 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 short-term. So 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 more -- take more trading profit for the matter.

[Unknown Analyst]

Assuming RAM would be at 62% and 38% corporate based on domestic international. And you measuring international book and domestic corporate book may rise, keeping the money market in line, you may not name the customer, but if I eliminate PFC, REC, [indiscernible] certain similar accounts which are government backed or AAA customers. And I'm 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 higher. So where are you seeing positivity and which sectors are you seeing negativity from our bank book that you would avoid in the year?

[Debadatta Chand, executive]

See, as far as tapping the market, depending upon the ability, excluding the large public sector PFC, but other NBFC also tapping the market with time on that. RBI, the risk weight was slightly -- it was -- we reduced the growth on the NBFC and the risk weight is taken out. So 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. And 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.

But then -- so there is no specific actually, if you 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 avert, every sector we are there in. Maybe the growth percentage can be 4% to almost 16% depending upon the opportunity available there in.

As far as housing is concerned, suppose you say that I'm growing at 20%, the market is growing at almost 16%. The 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. So I don't think there are any constraint for us to avoid any particular sector, whether in the bond side or on the loan side. Bond side, there is a minimum threshold rating that every bank has, but we are open to lending in all sectors in both on the debt side and also on the loan side.

[Unknown Analyst]

Your data and process centers specifically led by BOB shared service, all that is known in the market. And it is helping you in the sector. So I understand that you will grow faster than the system. But systematic growth, you may grow by 4% higher, 5% higher, 7% higher. If you were to choose a sector housing loan, I understand, anything specific other than that stands out supply chain you're doing well, I understand.

[Debadatta Chand, executive]

Auto loan, I have been also consistently growing more than 20%. That's the 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 a huge book. [indiscernible] slightly, I mean, they were not so strong. Now we built up that model to deliver on that account.

A couple of -- on the MSME pitch again, I mean, if you compare the PSU pack and then figure out, the [ CBCME ] is one product, supply chain is another product where we have a aging of almost 4, 5 years in terms of running this business. I mean, there again, private sector banks were very strong on these 2 products earlier. So we are now 4, 5 years picked up our scale rather more than 4, 5 years. So I think, I mean, opportunities are there. Suppose I want to grow, let's say, on underlying good liquidity market for this year, durable liquidity, which, again, all of us think so.

Our ability to grow at 14%, 15% can be -- we can always achieve not only the system, Bank of Baroda, the 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. But this quarter is slightly a dampener as of now because of immediately getting into the slack season, then a lot of resetting do happen. But I think by Q2, Q3, it would pick it up.

[Unknown Analyst]

Sir, 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 ramp. So your digital spend would be -- on new initiatives will be higher than where we stand today. And that CapEx also will be with AI and many things will change. So these 2 sustainable numbers and where do you see the forecast on spend on that?

[Debadatta Chand, executive]

See, rightly, we wanted to -- when the CFO made the presentation, he talked about CASA percentage growth as something that we wanted to highlight on that. And we realized 2, 3 years back saying that CASA is going to be a challenge because there were the underlying, I mean, pockets where the CASA was very strong, started reducing on those pockets like Tier 2 city where CASA normally is very high, it used to be very high, went down because of the, I mean, change preference. So we focus on -- we have not increased the CASA rate. I mean on the entire rate cycle, the CASA rate was the same like it was there earlier, maybe a 5 bps change.

Many of the banks would have increased significantly. We have not reduced the CASA rate there in. Still then because the service offering, we improve bundling that we improved, our growth -- 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 2 components, one is saving and other the current.

I mean, segregate both the data and compare Bank of Baroda's saving growth vis-a-vis the system's saving growth. So through all these measures, I think that's not -- we are not satisfied. We need to grow much higher than that. But then there, again, we created a bit of resilience in terms of attracting good deposit, continue to focus on that. But this quarter, again, a couple of growth -- component-wise growth guidance possibly in a position to give only after June because there is a change happening in this quarter, which we need to be mindful. And your second question was on?

[Unknown Analyst]

Digital spend.

[Chayani Sundar, executive]

So digital, since there are a lot of initiatives which have been taken. So there is a consistent movement on the increasing the spend on the digital or the tech as a whole. So we are currently somewhere around 10% of the operating profit. That is what we are looking. We'll try to upscale it based on the kind of environment in which we are growing. And including with the AI coming in, obviously, the cost -- the investment will go up on that side.

[Debadatta Chand, executive]

Just with a small clarification, 10% including CapEx, OpEx together.

[Unknown Analyst]

Sir, secondly, you highlighted that you would be rather -- you wish that we are recognized as a consumer bank, not a corporate bank.

[Debadatta Chand, executive]

Wish to be like that, not like recognized, but then we have got a higher retail book.

[Unknown Analyst]

There is a benefit also if you are a true consumer bank. So I am nothing against that. Keeping consumer bank logo in mind, what are you going to do to cross-sell because you have BOB capital market, you have BOB shared service, many other things. How is your income compared to specifically, let's say, SBI or HDFC, the trajectory would look in the next 3 years.

[Debadatta Chand, executive]

See, on this consumer piece, frankly, I mean, the banks you are referring, we started very late in that manner actually, but the growth for the last 3, 4 years has been good on the consumer side. We created capacity, the flow -- actually, we 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. So improved capacity in the entire consumer loan piece.

So we'll continue to drive to attain 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? But I want to grow because I have 8,200 branches. I have large footprints in terms of digital. Suppose I don't create consumer base there in, and then I think I'm not doing proper work on that. So 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 e-Pay. And bob e-Pay is one app, which also meant for customer and also for noncustomers. And precisely, the theme that you were telling with regard to the consumer base, the idea of that app is there. The bob World is only for customer or a new customer onboarding into the bank as a customer. But the generic different app, we -- although running 2 super app is difficult, I understand that, but then we need to target a noncustomer. I mean they need to be part of the customer. Once they get a service of the bank, possibly, they could be a future customer. So we're targeting how do we attract, yes, BOB Cap, I have insurance business that also is the retail business. I have a card business. There is also a retiral business. BOB Cap typically helping us in terms of how do we gain the reach within that consumer base. So I think as a group, we are very well placed to capture on this market.

[Unknown Analyst]

Having insurance, credit card, share advance, mutual funds, the base what you have today in the bank, can it double in 3 years?

[Debadatta Chand, executive]

What can doubled in 3 years?

[Unknown Analyst]

The number of customers you have between the segments.

[Debadatta Chand, executive]

That's difficult to say, but then my consumer base is increasing. Next time I want to 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 we go to fintech is one of the challenge for commercial banks, right? So fintechs, they have grown big time. What is the primary objective they acquired customer and then they try to create flows, then now they're trying to create book even within the [ 4 wall ] I can say that trying to create a book even. So one of the key challenge that we are trying to address as a legacy bank of 117 years, how do I can attract customer into my system, whether it is a small UPI system or a big loan system or a digital lending system, but 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 customers should decrease because I want the young customer. So all these efforts, we have operationalized a company called BarodaSun Technologies. 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 technologies so that all these young customers be part with the bank. So 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.

[Operator]

We'll try and take the last question from I think behind.

[Debadatta Chand, executive]

Maybe you are the last one, last to last one, then you are there.

[Unknown Analyst]

[indiscernible]. 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?

[Debadatta Chand, executive]

See, I have not increased during the rise. So why should I reduce during the fall. Actually, there is no case for that. See, the only increase that we had is a 5 bps in the 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 there is -- anyway ALCO is competent to take a call, but then I don't think there is a case for it.

[Unknown Analyst]

Sure. On the MSME slippages, I can see that your SMA number is down from about 50 to 33 bps, but that's INR 5 crore plus. Does that include the MSME slippages or reduction is entirely because of...

[Debadatta Chand, executive]

Anything clearly more than INR 5 crores is captured over there, whether it is -- I mean, corporate...

[Unknown Analyst]

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 SMA? That's what I'm asking.

[Debadatta Chand, executive]

The SMA1 to book credit, it is almost at 0.33. 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 less than 0.10. So that talks about the quality. That account it goes into SMA and some of the quarter, it goes into SMA and then pulls back because the government has -- no, I can't say that. There is a lumpy account of state entity lumpy account, not a central entity account.

[Unknown Analyst]

And just clarifying, you said 34%, 35% of the book is repo-linked. That entire 34, 35 bps -- 50 basis point reduction in yield is [ different ]. It is already done.

[Debadatta Chand, executive]

Yes. Yes. That's true. That's true.

[Unknown Analyst]

Last bit on trade-off between growth and margins. I mean, there is a credit growth number that makes a lot of us happy. But 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. So were there segments even in noncorporate within Retail, within MSME, where yields are low because of competitive pressure, because of freight structure, whatever, where do you think that growth could have been sacrificed so that your NII growth would not have been just 2% for the full year?

[Debadatta Chand, executive]

No, no, growth nowhere to be sacrificed. There is a trade-off we do internally. That's 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. So while trying to always margin and growth, there will always be a trade-off and that's very challenging. But then currently, whatever growth we have given, we're comfortable on those segments. So that's the segment.

Otherwise, I said on the corporate, the growth potential was much higher, but we decided not to get into fine price asset because there's a high quality asset, no doubt about it. Every bank would like to be in that account. But then we decided as a strategy not to get into. So it's always a balancing call. I mean, fine price book is something that always debate in different committee. Otherwise, you are comfortable going wherever we are going as in today.

[Unknown Analyst]

And Manoj, sir, do you know what was the PSLC costs that we had to bear in the year or we can take it later if you don't have?

[Chayani Sundar, executive]

We had a PSLC, but then my PSL target we achieved 45% as against the target level of 40%. And with the change definition, this 45% is going to be 48% again. So adequately, book has the PSL compliance vis-a-vis the priority sector targets. I think you have one thing, I can just be a -- I'll come back to the last.

[Unknown Analyst]

My name is Vinayak, I'm from Jefferies India. So I had two questions. Firstly, on mortgages. Sir, we've taken some sharper rate cuts in mortgage from 8.4% to 8%, so could you explain the thought process behind this? And second, sir, continuing with the international segment, given that global yields are falling, how do you expect the international margins to trend?

[Debadatta Chand, executive]

Okay. Mortgage book, see, already the existing housing loan, the rate that you are referring is the best rate to the CIBIL 800 plus kind of a 750 or 800 plus customer. And the card rates are different, card rate is not at *%. The card rates are different at a different CIBIL score. So all the existing borrowers, already they got the benefit of 50 bps. So when we announced the new scheme, obviously, we need to make it at par with the existing customer and the new customer, and that's 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 a manner where the yield of the existing book is protected in the new scheme that we announced recently. So there is no challenge over there.

International, as I said -- international, we had seen, I mean, good NIM expansion, maybe a year back. Quality assets, which are marking them 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, so we could grow at that time, 20%, 25%, 30% on those markets at that time. But now the scenario is different. All these assets are getting repriced at a lower, the prices have gone down. So our normal thing currently, the international NIM is at 1.95% something. The normal threshold that we need to operate in that market, any NIM, which is above -- 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, and so the market goes on, we'll try to maintain both the market there. Anything, Mr. Chayani, do you want to add on the international?

[Chayani Sundar, executive]

So another thing is that unlike domestic market, the international both sides, liabilities as well as assets, are largely linked to the floating rates. The only impact can be lag effect. So sometimes assets are getting repriced faster because of the linkage of different benchmarks. So let's say, 1-month SOFR-linked assets will get repriced faster than the 3-month SOFR-linked liabilities. Barring that, both the sites are largely floating rate linked. So all in all, we remain insulated largely because of the benchmark movement. .

What we basically look at what kind of assets are onboarding, what kind of spreads we are heading into. And the syndication book is giving us that much headway. So what MD Sahab is saying that largely, we remain focused towards that kind of spreads in the international book.

[Debadatta Chand, executive]

So with this -- you have the last question, and I have the last answer also ready, I mean that I'll give.

[Unknown Analyst]

Sir, there's one old large aviation account, I think you and Central Bank, you 2 are only having the very large exposure. I think overall was about INR 2,200 crores something, and you had some extra collateral property also of INR 1,200 crores something. So we have not heard about that account for a long time. I think in last meeting also, we have not discussed. So what is the status there? And what are the recovery charges? And is there any scope for the land to be monetized and to come as a buffer in the profit in the bottom line?

[Debadatta Chand, executive]

Yes. See, out of that exposure, 1/3 exposure we got through the guarantee money, which was [indiscernible] 1/3 already we got it. Exposure has gone down to 2/3 on that. There is a large land parcel is there as a collateral. The process is -- there are a couple of -- actually the Central Bank is the lead here. There are already 1 or 2 bid processes that run through. They are, again, going for further process on that. It takes time normally for realizing particularly large piece of land, any value on that. So there is not much of development on that account for last 3, 4 months. Anything happens, then we'll let you know on that. But then the bank is adequately one would already...

[Unknown Analyst]

No final loan loss.

[Debadatta Chand, executive]

I'm not expecting any loan loss on this account. I mean the account is fully provided. So -- but I'm not expecting any loan loss as of now on this particular account. Only last answer from madam. Beena, would you like to say something with regard to the liability side, what we have done something extra on that.

[Beena Vaheed, executive]

It has been a difficult year for liabilities. But in spite of that, we did well. We were within our guidance, whatever guidance we had given. And 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. And in the 76% though if you see whichever banks have now declared the results, you see there, CASA, we have done much better than the others. We almost had a 6.5% increase in CASA. And what I would like to add on here is you see the retail CASA piece, we almost grew by 5% in retail CASA. So that is something which has been good with regard to the liability piece for us.

[Debadatta Chand, executive]

I wish all of you to open a master stroke account. That's one thing where curated account curated by the master himself. So that's something I think...

[Unknown Analyst]

So just a small last one. We have an MOU with IREDA. We entered with MOU with IREDA for the solar, I think, proposals and this thing. So and where our exposure is INR 18,547 crores total in the renewable energy. So in case of IREDA, what kind of arrangement do we have? Does it come automatically whatever project IREDA appraise and takes, we automatically take some share out of that or every proposal is separately appraised, like recently, I know they have taken one proposal of just some INR 1,450 crores, a project of INR 2,150 crores on that -- this thing. So what is the mechanism set up under that MOU to have those loan accounts?

[Debadatta Chand, executive]

The MOU is nonbinding one in the sense that suppose the 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 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 its 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.

[Unknown Analyst]

Full appraisal.

[Debadatta Chand, executive]

Full appraisal, absolutely full appraisal on that. We have signed up with not only IREDA, we have signed up with REC. We signed up also with a state government. We're one of the banks...

[Unknown Analyst]

I just found it here actually. So I thought...

[Debadatta Chand, executive]

Yes, we signed up with the state government also an MOU for funding renewable because that's a champion sector for us.

[Chayani Sundar, executive]

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. So for example, IREDA can't issue LC, if LC is required in a project funding. So they can collaborate with us, provided we accept the credit as the acceptable credit. Then they require escrow account to be maintained. So here is an MOU, which works when the teams engage with each other in a structured manner and mutually they garner the benefit. So it's purely acceptable to bank running on our own due diligence, then only. MOU doesn't induce any responsibility either on IREDA or Bank of Baroda.

[Debadatta Chand, executive]

So once again, thank you all of you and sparing your time today. As I said, this is an eventful morning as far as the country is concerned. For sparing time again, thank you. And initially, we planned for 45 minutes, but it went on for 1 hour 30 minutes. So thank you all for that. Thank you very much.