Lending rate hikes won’t deter borrowers: Bank of Baroda MD

Amid lending rate hikes from several lenders, Bank of Baroda chief executive and managing director Sanjiv Chadha on Thursday called the increases a “normalization” of borrowing costs, which won’t deter applicants from lending. ready.

He also said the corporate sector is in better shape after the deleveraging seen during the pandemic to absorb rate hikes, and the economy will also handle the increases.

The comments come amid a wave of lending rate hikes by banks following a shift in rate strategy by the Reserve Bank of India (RBI) to the upside in a bid to tame inflation galloping, which has constantly exceeded the upper tolerance band of the Central Bank.

The RBI raised its policy rates by 0.90% in two consecutive actions in the last 45 days, which led to an automatic increase in linked external benchmark rates and banks also increased those in the old systems as the cost marginal of loan-based financing.

“We are seeing interest rate normalization and our corporate sector clients are strong enough to absorb its impact,” Chadha told reporters on the sidelines of a conference hosted by the IMC Chamber of Commerce and Industry here. .

Speaking at the conference, he said a recent survey of 2,000 businesses by the public lender showed a big improvement in the interest coverage ratio for businesses.

Lenders are also in a better position now to take out the loans needed for economic growth, he said, pointing to the higher provision coverages and capital reserves they currently hold.

However, many experts pointed to the tough times ahead amid soaring commodity prices due to geopolitical tensions and also believed that these challenges will be tougher than the COVID pandemic, he said.

Chadha said we need to be “bloody” about banks’ ability to withstand challenges and also their ability to support the economy by increasing credit.

The bank is seeing higher loan demand, which is significantly better than what it has seen in the past three or four years, he said, noting that demand from the steel and cement is the highest.

Chadha said he was “cautiously optimistic” about the future and reiterated that banks are better placed to handle the situation now.

The bank sees higher demand from businesses, which make up half of national advances, but retail growth will be faster, Chadha said.

It also relies more on business correspondents while continuing to maintain its branch network, Chadha said, adding that a few years ago it had two business correspondents (BCs) for each branch, which has now gone to five BC per branch despite an increase. the number of branches to 8,000.

Speaking at the same event, the chief executive of private sector life insurer ICICI Prudential, NS Kannan, said insurance companies wanted papers with longer maturities of more than 50 years, which they are not able to get in the market and have been in touch with stakeholders for the same.

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)

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