UAE accounts for 40% of BoB’s global balance sheet

Having remained dormant for more than 30 years in the UAE, Bank of Baroda (BoB), the only licensed Indian bank in the emirates, is suddenly charting a new course to take on the dominant players in the banking arena. A new vigour is evident with the entry of a new chief executive Ashok K Gupta, who is handpicked to take BoB – one of the largest banks in India – to the next trajectory of growth. His SWOT analysis identified the bank’s Achilles heel. One year on the job, Gupta could make other bankers sit back and take note of the beginning of a success story. Ashok Gupta shared with Emirates Business his diagnosis and remedy. Excerpts:

Bank of Baroda has been here for more than 30 years as the first and only licensed Indian bank in the UAE. But it has not grown to its full potential in spite of the presence of a large expatriate population in the UAE. What went wrong?

Yes, the bank has not grown to the extent it should have. But now things are changing. In the past one year, since I took charge in October 1, 2007, the growth has been much ahead of the average in the banking industry in the region.

I realised that the bank has not been positioned where it should have been. You are right, the bank was not visible, business was low. It was perceived to be a negligible player in the market. Nobody recognised the bank. The image of the bank was very poor. It was supposed to be a remittance bank and a DD issuing bank, while the capabilities of the bank was very high.

My immediate task was to improve the image, increase the growth rate and make it more visible and customer-centric. I am happy to share that the growth rate of the bank has been almost 65 per cent, probably the highest growth rate achieved in any single year in the past 30 years.

Can the growth of the bank be attributed to the restructuring of the bank that has undergone in India?

To some extent, it is true.  But I shall say it was because of certain initiatives we took here. We identified the ‘negative’ points of our operations. One was the lack of visibility. So, first we undertook a complete makeover and publicised our products and services. We changed our decision-making system and made it competitive and fast. There was practically no marketing in the past. So I sent out our marketing staff to the field. With all these and a faster decision making I wanted to transform the bank from a ‘sleeping bank’ to a vibrant one. But we have a long way to go.

My dream of a vibrant bank is to make it the first choice of every customer, every citizen of the UAE. I don’t want to limit my customer base only to the Indians here. I want it to be broad-based, multi-ethnic and truly multi-national.

The other foreign banks, such as Citibank, HSBC and Standard Chartered, operating in the region have gone much ahead. Five years down the line, will you be on a par with them?

On many things, we are not only on a par with them, but better than them. I am getting a good number of customers leaving the so-called multi-national banks.

What do you think was the stumbling bloc that prevented customers from coming to your bank?

May be, we were not very aggressive in marketing. There was lack of technology. Today, we are one of the best in the world as far as technology is concerned.

All our UAE branches are electronically connected to 1,800 branches in India. No other bank can offer the kind of reach we can offer to the Indian population. Though an Indian bank, we are more multinational than many of the western banks operating in the UAE. We are present in 25 countries with 71 offices, which many of the global banks cannot claim. We can claim that we are more multi-national than many of the so-called multi-national banks.

But why are you limiting your bank’s branch network to just six while you can go up to eight? And you had closed down a branch earlier. Why?

There were many reasons. One was the slow growth in the past. We will now try to use the full potential and are approaching the UAE Central Bank for revalidation of the licence. We want to reach out to more customers but the limited branch network is restricting it. We are trying to overcome this weakness with technology.

We recently opened an electronic banking unit (EBU) service in Jebel Ali. For the customers, it is a de facto branch as we offer almost all banking services through this unit.  The second one will be opened at Mussafa in Abu Dhabi. We are seeking Central Bank’s permission to install such centres in Karama, Sharjah, Sheikh Zayed Road in Dubai, Ras Al Khaimah and Al Qusais in Dubai. We’ll then be able to cover a major portion of the country. That will help us increase our visibility.

But that is not enough. What were the other initiatives?

We started a special purpose Retail Banking Shoppe. The strategy was to have a focused approach and we divided the bank in different lines of business. Retail Banking Shoppe focuses on retail and NRI banking,  then SME Loan Factory for extending credit to small and medium-sized companies, who have sales turnover from Dh15 million and Dh75m. Our promise is that we sanction loans within 48 hours. We have set a time limit for ourselves to sanction loans. I can proudly say that there are very few banks who can set such a time limit.

We are changing our decision-making system drastically. We had a traditional multi-layered system to vet credit proposals, which was time consuming.

The debt processing system is now centralised, which reduced the sanctioning period from two months to 15 days. Though we have not yet introduced e-banking service, which will be done soon, a system is in place to send daily e-mail to Bank of Baroda’s customers notifying their previous day transactions.

E-banking services will be introduced in six months. Next in line will be fund transfer facility in which a customer can transfer money anywhere in India free of cost. We don’t see remittance service as a money making business. That’s for exchange houses. Through the electronic fund transfer system, a customer can transfer money to all the 1,800 branches of Bank of Baroda and more than 40,000 branches of other banks in India. Within Bank of Baroda it will be instant transfer and for branches of other banks within 24 hours.

Bank of Baroda has received an approval from the UAE Central Bank to take into account your global capital for underwriting syndicated loans in the UAE. How has it equipped you to emerge a notable player in the syndicated loan market in the GCC?

Now we can take larger exposures. I will not call ourselves a major player in the syndication market, but Bank of Baroda is an active player. We are going up in the ladder.

We have arranged a few syndications recently. We are also taking up a few underwriting roles. When we arrange more syndications, automatically our business will go up, our balance sheet size will be larger, fee income will increase and ultimately the customer base will be broader. We notice more mergers and acquisition (M&A) activities  taking place in the region and want to have a pie of it. We plan to start a syndication centre to finance M&As. Plus, a lot of Indian companies are coming here and we want to extend our services to set up shops.

Are you adequately capitalised for this?

Our global capital is so big that we can take large exposures.

How is your fee income growing?

Our fee income comes from various exposures, not only from retail banking.

This year we are going to build up our retail division strongly. Our fee income comes mainly from the SMEs (small and medium enterprises) and corporates. We include our NRI banking in retail banking. We even grant housing loans for purchasing property in India. We plan to introduce wealth management service shortly.

Our plan include collaboration with leading mutual funds and online trading firms  to offer better service to our customers.

What about stock trading facilities?

Not only e-trading, we plan to offer payment gateway through which we are connected to the broker’s server. We are extending here our tie-up with India Infoline.

What is your bank’s customer base and asset size?

The base has risen to 100,000. It was only 73,000 last year when I took charge.

As of March 2008,  the asset size is in the region of Dh10 billion. The bank’s total assets stood at $36.4bn for the fiscal year ending March 31 last year, with net profit for the year rising to $261m.

UAE operations account for almost 40 per cent of our international balance sheet and the international operations contribute more than 25 per cent of the group turnover.

Out of the six GCC countries, we have operations in three – UAE, Oman and Bahrain.  Soon there will be presence in Qatar, Kuwait and Saudi Arabia.

In the UAE, we have tied up with a few free trade zones to extend credit to companies for setting up their operations. Already we have tied up with Ras Al Khaimah Free Trade Zone and Hamriya Free Trade Zone.

Expansion road map

During the past one year, BoB has taken various initiatives and many more are in the pipeline. The bank has extended banking hours from 8am to 8pm, increased number of ATMs from 11 to 20 and launched e-remittance online product – Rapid Funds2India - for free instant online remittances to India among other steps

- Started Retail Banking Shoppe offering all retail products – housing loans, vehicle loans, personal loans, loans to traders and professionals with on-line sanction of loans;

- Started Centralised Processing Cell for faster disposal of larger credit proposals (Dh10 million and above) 

- Started Syndication Centre for actively arranging, underwriting and participating in syndicated loans for funding requirements of large corporate houses

- Started SME Loan Factory to cater to the specific needs of SMEs in a time bound manner

- Entered into MoUs with Rakia/Hamriya Free Trade Zones  (FTZs) for financing the new upcoming units

- Signed agreement to act as a settlement bank in Dubai Gold and Commodity Exchange (DGCX) for smoother online trading of gold and other commodities 

- Obtained approval from Dubai’s Land Department for opening and managing escrow account of the property developers

Profile: Ashok K Gupta

CEO (GCC Operations), Bank of Baroda

Gupta, who took over his current position at Bank of Baroda on April 1, 2007, has worked in various capacities, in prestigious and large branches in Delhi, Mumbai, London Main Office before his Gulf assignment.

He was deputy head of international operations of the bank for two years and prior to that he has been in international banking for five years at corporate office.

From 1995 to 1999 he was posted in London. During his assignment as deputy head of international operations, the performance of the international operations of the bank achieved new heights in terms of business and global presence.

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