Russia-Ukraine war impact minimal; corporate investment cycle picking up: Bank of Baroda

The direct impact of the Russia-Ukraine war on the banking industry in India will be minimal, Sanjiv Chadha, Managing Director and Chief Executive Officer of Bank of Baroda told CNBC-TV18.

He said for the banking industry as a whole and particularly for Bank of Baroda the exposures are very limited to Russia, so to that extent, any direct impact has to be very minimal.

"Having said that to the extent that the global macros are impacted, to the extent that any challenges we had in terms of supply bottlenecks would be accentuated, the impact would be there but that would be a second-order impact. In terms of direct impact, very minimal," he said.

Chadha said that the growth guidance has been revised from 7.75-8 percent to 7.5-7.75 percent and noted that the corporate investment cycle is picking up as COVID-19 fades away.

Talking about interest coverage ratios, Chadha said about five years ago 50 percent of the companies had them of less than 3 times. "Today that percentage has come down to 20 percent and within that interest coverage ratio of less than 1 was 10 percent, today is under 3 percent," he said.

He said that because the interest coverage ratio is reducing, there has been a secular deleveraging of balance sheet that has happened.

"The impact of any increase in interest rate, to my mind, should be marginal going forward and all told, we probably are looking at normalization of rates and to that extent, it should be well absorbed by the companies and the economies," he said.

Last month, Bank of Baroda's shares scaled a 52-week high after the state-run lender reported its quarterly financial results. The Bank of Baroda stock jumped as much as 10 percent to Rs 117.3 on BSE, the latest in a series of 52-week highs last week surpassing an earlier high of Rs 108 in November 2021.

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