Page 5 - Banking Finance May 2020

BANK UPDATE

BANKING

NEWS
NEWS
NEWS
NEWS
NEWS

Bank of Baroda completes Bad loans in banking sec- report said. However, the COVID-19
related situations are likely to result in
integration with Vijaya tor may rise by Rs 5.5 lakh another cycle of stress.

Bank cr this fiscal
Bank of Baroda has completed the IT Covid 19 crisis which has brought the The rating agency said as per a stress
integration of 132 former Vijaya Bank economic activity to a standstill may analysis of 30,000 corporates, the to-
branches. With this move, 152 result into total slippages in the bank- tal standard-but-stressed corporate
branches of the erstwhile Vijaya Bank ing system upto Rs 5.5 lakh crore in the pool may increase from 3.8 percent of
have been integrated, enabling cus- current fiscal, says a report. the total bank credit as of December
tomers to get the banking experience 2019 to up to 6.6 per cent in this fis-
as provided by Bank of Baroda. Post While slippages from the corporate cal.
the IT integration, customers visiting sector may rise by Rs 3.4 lakh crore, for
these particular branches will be using non-corporate segments it may in- Out of this, the agency estimates
corporates exposures of up to 3.2 per-
the banking services of BoB instead of crease by Rs 2.1 lakh crore in FY21,
cent of total bank credit are at a high
Vijaya Bank. Before the initiation of India Ratings and Research said in the
the migration process, all payment report. risk of slippage.
channels such as ATMs, NEFT, RTGS The report further said the growth
and IMPS, UPI, of Vijaya Bank and The rating agency said most sectors in slowdown due to the COVID-19 out-
Dena Bank were integrated with BoB. the county are likely to experience vary- break will aggravate the stress and slip-
ing degrees of revenue contraction
pages in the non-corporate segments
The merger of Vijaya Bank and Dena during FY21 due to demand and supply -- retail, agriculture and micro, small
Bank into Bank of Baroda came into disruptions.
and medium enterprises.
effect in April last year. The merger
saw 2,135 branches of Vijaya Bank and "COVID-19 may drive total slippages of "About 40 percent of the incremental
1,777 branches of Dena Bank merge up to Rs 5.5 lakh crore (5.7 percent of slippages could come from the non-
with BoB. "We took an incremental the gross bank credit)," it said. corporate segments," it said.
approach for migration. As a test case,
we first migrated one branch of Vijaya Banks faced elevated provisions result- The rating agency said the pre-COVID
Bank and then 10 branches. Earlier this ing from the corporate stress cycle credit costs estimates for FY21 show
month, we migrated another set of 10 over FY16-FY20 and they had largely an increase of up to 60 percent, which
branches, and this weekend we mi- provided for the existing corporate would bring the profitability of most
grated 132 branches," Sharad Saxena, stress and were progressing towards a state-run banks under pressure in
BoB's chief technology officer said. more moderated credit cost cycle, the FY21.

BANKING FINANCE | MAY | 2020 | 5