Bad debts arising due to non payment of loans by small borrowers have led to increase in the volume of NPAs of Bank of Baroda. The fact was confirmed by Bank of Baroda Executive Director R.K. Bakshi.
He said that majority of NPAs arose when small borrowers taking loans up to Rs. 50, 000 could not repay back to the bank due to several reasons like non viability of the project or failure of crops or business.
However, Mr. Bakshi said that the bank has NPA ratio at 0.31% which is better than any other bank not only in the country but is also comparable to overseas benchmarks.
He also said that the bank had a strong financial position and the bank is expected to touch a business of Rs. 4 lakh crore by 31st March 2010.
However, NPAs are a concern for any bank as NPAs reflect the performance of banks. Rising NPAs is an indicative of the rising number of loan defaults with the bank which ultimately affects its profitability.
Talking on grounds of interest rate hike, Bakshi said that BoB may increase interest rates in the next 2-3 months in view of the improving status of the bank's credit portfolio.
"We expect an increase in interest rates after two or three months," he said.
Bakshi hinted on BoB's plans to open 350 more branches across the country, including 11 in Jharkhand in 2011.
He said the bank would also recruit 3,500 persons, including in the officer grade, by December this year.