Bank of Baroda concerned over high liquidity

With more than $1.5 million in profit for the year ended March 31, 2012, the Bank of Baroda (T&T) Ltd is poised for further growth, said managing director Yesh Pal Chhabra.

The bank has been operating in T&T since 2007 and has fixed assets of more than $5 million. The Government of India owns 58 per cent of its parent company.

Chhabra said he is not daunted by competition in the T&T banking sector.

“If the banking sector in T&T has performed at 3.8 per cent, as I understand from the Central Bank’s statistics, our growth of more than 10 per cent is reasonably good for 2012. In respect of deposits also, the banking sector has grown less than 10 per cent here, whereas we are close to 20 per cent. Our performance is 100 per cent better than other banks, we feel satisfied.”

Like every other financial institution operating in T&T, liquidity is a big concern.

In its February 28 repo rate report, the Central Bank said: “High net domestic fiscal injections contributed to a sharp build up in financial system liquidity in February 2013. Commercial banks’ holdings of excess reserves at the Central Bank climbed to a daily average of $5,132.5 million in February 2013 from $3,432.3 million in January.” 

Said Chhabra: “I feel that there is no immediate answer to this with anybody. This—the liquidity problem—needs the highest level of consultancy and personal involvement of the authorities who are the decision-makers in the country, because if the country and the banking sector is left as it is, then the economy would continue to suffer further.”

Asked how does the parent company handle its liquidity issues in India, Chhabra said investment can be made anywhere in the world. He said the T&T branch of the Bank of Baroda is limited to investing only ten per cent of its capital. He said investing more means the bank has to get authorisation.

“That (the ten per cent) is too small because the (bank’s total) deposit would be many times higher than your own capital.”

Asked why would it be lucrative for the Bank of Baroda T&T to put its surplus funds in its parent bank, he said the bank can earn more interest.

Asked whether listing on the T&T Stock Exchange would be lucrative, he said expanding the loan aspect of its business is more lucrative.

“We would like to expand by giving loans, instead of parking our funds in investments. We are waiting for the right opportunity when the business community would approach us for funding their projects.”

Explaining further why investing in the stock market is not lucrative, Chhabra said investing in bonds is “not banking” as it does not directly “help the economy.” 

He said the bank is always looking for opportunities to lend money to small and medium businesses.

Chhabra said the Bank of Baroda has an estimated five per cent loan delinquency ratio is compared to the banking sector’s 5.4 per cent.

The banking executive said of the three branches, the Chaguanas branch receives more loan requests over the other two in Port-of-Spain and San Fernando. 

Efficient customer service

International standards are being practised at its T&T branch, Chhabra said, adding that service to customers must be up to par so that a customer should not spend more than ten minutes to complete their transaction.

“A person should not wait for more than two weeks to get a loan. We are trying to target people. The moment you submit your entire project for a loan, immediately our teams get into action to formally sanction it. We don’t take more than a week to sanction it. That is what we are very proud of, that we are trying to match those (international) standards,” he said.

As members of the business community continue to complain about the availability of US currency, Chhabra said: “In 2012, the Central Bank of T&T has perhaps revised their distribution. They are coming out with an auction every month. The Bank of Baroda T&T is participating and is getting a very ‘handsome’ share in auction. Anybody can bid. The Central Bank is happy with our performance. They have appreciated the role in the deployment of the US dollar loans to the importers and they have increased our share,” he said.

Chhabra said 50 to 70 new local importers have joined the bank.

“They have opened new accounts with us expecting that we would provide US dollars. Currently, they (importers) are not getting enough US dollars. Close to 90 importers have been getting US dollars from us; it’s a good achievement.”

He contends the customer should have options and “there should be certain directions from the regulators as to who should get (US dollars) how much they should get, so there is more transparency in the system.”

Bank of Baroda’s external environment

Chhabra remains hopeful there would be further growth. 

On the issue of crime, he said it is not a deterrent to operating in T&T.

“When we came to this country, it is not that we were not aware of the situation. The only thing we were expecting is that it would improve. We hope the steps taken by the Government would prevail and the crime would be under control. Banking business is not like that; you open today and you close tomorrow. As long as T&T prevails, the Bank of Baroda will also prevail.”

2013: The way forward

“December 2012, we had concluded with 85.75 per cent (growth) in terms of deposits, that is the period January 2012 to December 2012.”

Expanding, he said the bank has provided assistance to an India-based company to start a battery recycling operation in T&T.

According to Chhabra, the company is bringing US$2 million in capital and the balance of funds needed to start the operation would be funded by Bank of Baroda T&T. 

Bank of Baroda T&T is scheduled to meet with Central Bank Governor Jwala Rambarran.

New chairman

Bank of Baroda T&T is also getting set to welcome its newly appointed chairman Petluri Srinivas, who is the global executive director of Bank of Baroda, India.

In a statement, the bank said: “Srinivas oversees the international operations of the bank in 25 countries besides domestic operations in India.”

Srinivas has three decades of banking experience and “his induction as chairman of Bank of Baroda T&T Ltd is seen as the beginning of a new era for the bank in T&T.”

He is responsible for international operations of the bank.

“We feel that he will be bringing a lot of exposure and experience. We are also looking to him to guide the future course of the activities for Bank of Baroda (T&T), just like he is doing for other subsidiaries.”

About the Bank of Baroda (T&T):
• Established in 2007
• Expanded in 2009 by opening two more branches
• Recorded year-on-year growth of 18.75 per cent in deposits
• Recorded year-on-year growth of 10.47 per cent in loans in 2012
• Its foreign exchange business recorded 21 per cent growth in terms of sale and purchase of US dollar and remittances

About Bank of Baroda (India):
• 42,000 employees
• 4,200 branches
• has a presence in 25 countries

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