‘Cautious on growing non-individual loan book’
On the back of income from the sale of investment, dividends and the reduction in tax rates, HDFC reported healthy numbers forq2. Even as the asset quality remained broadly steady, KEKI MISTRY, VC & CEO, HDFC, told Nidhi Rai that the housing financier is cautious about growing the non-individual loan book and linking lending rates to external benchmarks could be risky. Edited excerpts:
What is the corporate loan book looking like and what is the outlook?
We have always said that we look at our business in two separate segments — one is individuals where we target steady and stable growth over the years, and the other is non-individuals loan book where the business is a lot volatile. Also, we have told the market that we are cautious on the non-individual loan book and we will remain very cautious. That’s the way we have been from the last four quarters. From April to September 2019, 94 per cent of the new loans have been to individuals and only 6 per cent have been to non-individuals. So, for individual loans, I will say the business is as usual, but for the nonindividuals, the scope to grow and demand are high.
There was a small uptick in gross non-performing loans (NPLS). Do you see pressure on assets quality?
NPLS went up by four basis points from 1.29 per cent to 1.33 per cent sequentially which is not a significant increase. NPLS are not in our control because it is a technical definition. If the borrower is not able to pay any instalment, technically the loan becomes non-performing. We can be prudent with our lending and we already are. We can take extra security and secure our loans as much as we can, which we are already doing and we can be very conservative in our provisioning. The provisions are at ~7,313 crore. We are carrying provisions, which are double the regulatory requirement.
How has external benchmarking impacted the business?
Linking the lending rates to external benchmarking can be risky because as long as rates remain low or rates come down, the customer will be benefited. But, the rates, which are going down now, will go up... (and) the impact will be felt by the customer.
Your views on the current status of non-banking finance companies (NBFCS) and housing finance companies?
A lot of NBFCS are struggling for liquidity and meeting the liability requirement by selling loans… and raising money and using that money to pay off liabilities. It is no longer the problem of liquidity; there is enough liquidity in the market. It is now more the case of risk aversion.