It gives me great pleasure to place before you the highlights of the Bank's performanceduring the financial year 2019-20 (FY 2020). This was the first year of the amalgamatedentity after merger of Vijaya Bank and Dena Bank into Bank of Baroda. I am happy to saythat the amalgamation process was completed smoothly without any disruption orinconvenience to the customers. Once the changeover of the technology platform iscompleted in the current financial year the customers of all erstwhile banks will haveseamless benefit of advanced level of bouquet of services.
FY2020 was the year in which the change of MD and CEO happened. Mr. P S Jayakumarcompleted his tenure of 4 years in the Bank successfully leaving behind many innovativepractices in the Bank. I would like to express the gratitude of the Board of Directors tohim for steering the Bank through the amalgamation. I would also like to welcome new MDand CEO Shri Sanjiv Chadha who brings with him the rich experience of the largest PublicSector Bank - SBI. I am sure new milestones will be achieved during his tenure in ourBank.
The Banking Landscape
One of the important areas of reform for the Government has been increasing scale andsize of the Indian banks. As part of this strategy Vijaya Bank and Dena Bank wereamalgamated with Bank of Baroda. Continuing with this strategy the Government hasannounced consolidation of 10 PSBs into 4. This will be helpful in strengthening balancesheet and underlying profitability to invest in technology to gain market share. Largebanks will also be in a better position to raise capital from the equity and bond markets.
Other than amalgamation the Government has implemented a number of reforms to increaseIndia's growth. Notable among them are reduction in corporate tax rate GST Insolvencyand Bankruptcy Code (IBC) opening up of mining sector to private sector proposedprivatisation of power distribution in Union Territories investment in infrastructure andfocus on Ease of Doing Business.
The benefit of these reform measures would be visible in the medium-term. However dueto cyclical factors growth slowed down in FY 2020 which resulted in deceleration incredit growth of SCBs to 6.1% towards end of financial year from 13.1% in the previousfinancial year. The lower growth can also be partly attributed to outbreak of COVID-19 atthe end of the year.
The Reserve Bank of India reduced policy rate by 250bps since February 2019 to supportthe economy. It also introduced an external benchmark linked lending rate for retail andMSME customers to ensure faster transmission. RBI has also taken steps to mitigate theimpact of the slowdown due to COVID-19 by injecting liquidity reducing CRR and advisingbanks to provide 6-month moratorium to borrowers. Bank of Baroda too has extendedmoratorium to its customers and has ensured continuous operation of banking servicesduring the COVID-19 outbreak in the country. I would like to salute all officers and staffof the Bank who continued banking operations during lockdown also. They too are thefrontline warriors of the war against COVID-19.
Bank of Baroda - The Continuing Transformation
We at Bank of Baroda have been investing in technology to improve customer experience.Initiativessuch as digitising account opening through TAB Banking revamping our mobileapplication centralisation of back office operations setting up an Analytics Centre ofExcellence (ACoE) and Baroda Kisan platform for our farmers are efforts in that direction.We are expanding our digital focus even further with setting up of a dedicated DigitalLending Department which will exclusively cater to digital on-boarding and processing ofloans for Retail and MSME customers using internal and external sources of information andstate-of-the-art machine learning and algorithms. These initiatives have already resultedin lower turnaround time and better customer experience. Our revamped mobile applicationis rated amongst the top 3 large banks in the country. Bank of Baroda has been ranked 2ndin Government's EASE ranking.
The benefits from amalgamation of the three Banks are visible in the first year itselfin the form of cost efficiency through reduction in cost to income ratio to 47.86% in FY2020 improvement in margins through increase in CASA ratio to 39.07% and better creditquality in the form of decline in nonperforming loans to 3.13%. The combined entity hasnot only reported a much higher operating profit but also returned to positive profit inFY 2020. This is despite the Bank increasing its provision coverage ratio to 81.33% in thefinancial year. The Bank also raised capital by way of AT-1 and Tier II bonds of Rs 6817crore. The results of the Bank show that Government's reform initiative is in the rightdirection of creating stronger banks which can invest in technology have higher profitsand raise capital from the markets leading to deeper capital cushion.
The Board of Directors of our Bank is continuously engaged with the management to setup business goals which benefit all the stakeholders including the shareholders. Ourstrategy this year will be to consolidate the gains of amalgamation and achieve betterefficiency parameters while delivering healthy growth in credit and profitability. Alsowe are conscious of the fact that the way we do business has to change in the post COVIDworld. We plan to strategise on these lines so that the adversity is converted into anopportunity. As the Chairman of the Bank I am excited to be part of this journey.