Welcome to an important economy segment. The Reserve Bank agreeing to pick up the entire hedging cost of banks when they raise FCNR or foreign currency non-resident deposits has had a positive impact on banking stocks. Among the best performing stocks was Bank of Baroda. It rose over 5% on the day after these announcements came from Reserve Bank. And Bank Nifty in general has been an outperformer for the past 2 weeks. To understand how the sector and the economy will get impacted by the various Reserve Bank of India and government measures, I have with me the managing director and CEO of Bank of Baroda himself, Mr. Debadatta Chand. Mr. Chand, thank you very much indeed for your time. Well, first up let me start with this FCNR deposits. Do you expect a substantial flow for your bank in particular? You have a lot of international branches. Do you see a substantial flow for you and for the sector?
Thanks, Latha, again. I think it is going to be there as far as the flows are concerned. And there are two measures that are very calibrated in terms of the announcement we have from the Reserve Bank of India. And it's going to improve the dollar liquidity within the system within the economy. At the same time, also because of the swap rule, the rupee liquidity with the banks. So, we had a similar past also measures significantly brought in significant inflow to India at that point of time. So, going by that, I think this measure is going to significantly bring the flows back into India. And what we estimate as a system as a whole is that roughly around 40 to 50 billion would be the amount of money that can come to India through all the routes. At the same time, Bank of Baroda has been one of the significant players last time also. I think we are also looking at something around maybe in upward of 4 to 5 billion in terms of flows which can be in the form of bond borrowing and FCNR B deposit. So, I think because of our franchisee across the world, I think we are better positioned to bring the flows. And the measures of the Reserve Bank of India is something that really gives us comfort to bring flows and utilize this money in a productive manner.
Okay, you are expecting 4 to 5 billion for yourself. I mean, for your from your own branches, is it?
What about the OFCB route? Overseas foreign currency borrowings. There the Reserve Bank is promising to pick up 1.5% of the swap. Does that make it attractive?
It is actually if you look at in terms of dollar liquidity outside India for a bank like us to borrow. I think there are very fine rates at this point of time. So, the current swap cost is almost 3% and RBI is going to have 1.5%. So, it gives a significant opportunity for us to slightly elevate our borrowing cost on the OFCB route. Not only us, but many of the players. So, that I think the market is going to be attractive if in case you offer 1.25% higher than the current borrowing rate. So, that's also a significant and there again, the players would be a wholesale player and where significant flows can come into India. And I think that's going to be very significant and we are comfortable at the current rate offered wherein the borrowing can happen with the swap cost of 1.5%.
Okay. So, should I understand that even you will be looking at the OFCB route?
Yeah, I mean, it can be all players. I mean, we also have large borrowing we keep doing borrowing outside.
I agree. That is exactly what I was coming to. You know, when it comes to certificates of deposits, you are a big player in the wholesale market as well. I'm looking at some numbers. I hope they are right. They're picked up by AI. They say that Bank of Baroda raised 1.94 lakh crore via certificates of deposits through calendar 2025 and is also a very large fundraiser in 2026. So, will that come down? I'm wondering if you're having the OFCB route, will this be less in the current year?
It would be because see, as I said, it's not only initially I said that the dollar liquidity within the system or within the economy, but also rupee liquidity at the hand of the bank because of these measures. So, obviously when we can raise rupee liquidity through the swap route, obviously the dependency on many of these instruments that you are referring would come down. That is one. Secondly, as far as the certificate of deposit of Bank of Baroda is concerned, look, these are again short-term deposits. So, it keep on rolling it over during the entire year and entire year it becomes an amount which is again you are referring to. So, we as a bank typically manage resources in a manner where the bulk deposit which typically of one year tenor and the certificate of deposit which is slightly shorter terms in terms of 3 to 6 months, so that we can optimize on the cost side of it. So, that's a part of the normal resource budgeting resource planning.
And obviously this is going to have a lower dependency on this instrument.
Okay. Now, the reason why I brought up the CD route itself is the CD market and the CP market best indicated the happiness of the interest rate market over these announcements. CD rates have fallen by about 30-40 basis points and so have commercial paper rates as well, corporate bonds as well. So, can we assume that at least for the next two quarters, like this and the next quarter, cost of funds of banks will fall?
It would all depend upon still we have one month to go for this quarter. I mean slightly for the earlier months, obviously on the wholesale market I'm not talking about the retail market on the wholesale market which consisting of bulk deposit and CD, things are slightly elevated earlier. And these measures immediately pulled down the market and I think on a going basis we have to watch out for the June quarter how it goes. But obviously these measures are going to be positive impact with regard to the cost of deposit, particularly the instrument of bulk and the CD are referring.
Okay. No, I was just wondering directionally can your margins be at the higher level of your range or even have an upside bias?
We'll see we have given the guidance after our annual results for March and we'll just see in June then we'll just see how it goes then.
