Bank of India Eyes Stronger Corporate Credit Growth In H2, NIM Likely Bottomed Out

Bank of India is gearing up for a sharp rebound in corporate credit growth in the coming quarters even after a slowdown in Q1 earnings, Managing Director and Chief Executive Officer Rajneesh Karnatak said.

Karnatak’s confidence has come on the back of the lender’s Rs 80,000 crore credit pipeline and loan sanctions at the last stage.

The public sector bank’s corporate loan book grew over 4% on-year to Rs 2.37 lakh crore in the June quarter. Karnatak attributed this to competitive market rates from AAA-rated borrowers and the bank’s conscious decision not to lower lending rates to preserve margins.

However, he said that the credit pipeline remains healthy, with strong traction from sectors such as data centres, electric vehicles, and green finance. He expects a pick-up in investment activity from September.

Answering to a query, he also said that the bank expects a resolution on its exposure to MTNL, a stressed state-owned telecom company, within the next three to six months.

This optimism also showed in the bank’s global loan growth target for the current financial year at 12–13% and global deposits at 10–11% on-year. Retail, MSME, and agriculture continue to be important growth segments, but with a more calibrated strategy, he said.

For the quarter ended June, the bank’s global advances grew 12% on-year and deposits at 9.07%.

On the retail side, the bank is focusing heavily on secured lending, particularly housing loans and loans against property. “We are consciously growing our retail portfolio through low-risk, secured products. There’s a strong focus on salaried-class housing loans and LAP, where asset quality is better,” Karnatak said.

Within domestic advances, the retail book grew 20% year-on-year, and the bank believes there is more headroom for healthy expansion through its regional business centres and improved underwriting processes.

On the liability side, the bank is working to shore up its current and savings account base, which has dipped below 40%, through MoUs with central and state government departments, PSUs, and digitisation initiatives.

However, the bank did report some asset quality pressure in the agriculture and MSME segments, with slippages of around Rs 1,000 crore in Q1. “These slippages largely came from small-ticket MSME and agriculture loans. While these are seasonal, we expect the numbers to be more controlled in the coming quarters,” Karnatak said, adding that the bank is closely monitoring these segments and strengthening recovery efforts.

On margins, the bank believes it has reached the bottom. The global net interest margin stood at 2.55% as of June-end, down from 2.61% a quarter ago. The decline was due in part to the bank’s international portfolio, where margins are structurally lower, and also due to the swift transmission of repo rate cuts on the loan side, particularly as 60% of the bank’s advances are linked to the external benchmark.

“While we passed on the repo rate cuts quickly on the lending side, deposit rate transmission lags. But we have started reducing deposit rates. We believe the NIM has bottomed out and should improve from Q3 onwards,” Karnatak said.

The Reserve Bank of India’s recent decision to reduce the cash reserve ratio is expected to release around Rs 8,000–9,000 crore for Bank of India starting September, further supporting liquidity and credit deployment.

He also said that the bank does not foresee any further repo rate cuts and is aligning its rate strategy accordingly. A recent savings deposit rate cut from 2.75% to 2.5%, impacting over Rs 2 lakh crore in balances, is expected to help lower the cost of funds.