‘Government capital spending will create new demand for loans’

What is your outlook on the cost of deposits in the coming quarters?

We ensured that our deposit growth is closely tied to our loan growth as any additional money you get will have to be kept at negative margin in reverse repo. Therefore, we ensured that our pricing of deposits was appropriate to achieve the kind of growth we wanted. If you look at our deposit growth structure, it is almost entirely Current Account and Savings Account (CASA). When it comes to fixed deposits, they have risen marginally and bulk deposits have declined by 17%, which tend to be highly priced. That’s why our deposit cost has dropped drastically. As more fixed deposits start to be included in the growth structure, there will be an impact on the overall cost. If you look at the overall cost, the mixed cost of the fixed deposit growth and the savings bank growth, we should still be able to maintain our cost. Two years ago, we were at a CASA ratio of 37% and today we are at 44%. So, we’ve built really strong buffers. When the rates start rising, the fixed deposit rates will start rising and not the savings deposits.

How do you view the government’s capital expenditure plans for 2022-23?

We were looking at two things from the budget. There was broad support to an economy as the private investment cycle has not fully lifted. The budget numbers are very promising, given that the government will support macroeconomic growth through higher levels of spending. The majority of this spending is now directed towards infrastructure development, which means borrowing opportunities for us. If you look at the last few years, in areas where the government has played an enabling role, credit growth has been good. We saw very good credit growth in road projects and this was because the government played a very proactive and constructive role through the National Highways Authority of India. Similarly, we have seen a lot of proposals come in the renewable energy sector and this is where there was a significant government intervention a few years back in the matter of power purchase agreements. The fact that the government is spending money and creating those conditions for wealth creation should translate into good opportunities for credit growth.

Corporate credit growth was modest in the third quarter, while retail loans accelerated growth. When do you see a jump in credit growth?

If you look at it sequentially, it clearly shows what is happening right now. We had a little tough time in Q1 due to Covid-19, but from the second quarter we have seen a pickup. It’s now quite a smart pickup that we’re already seeing. As we move forward, we should be able to see very rapid growth in total credit, backed by more rapid growth in retail and corporate.

Advance growth is not an end in itself and is aimed at increasing the Net Interest Income (NII). It is a product of two factors: advances and margin growth. If you have growth at the expense of margin, it doesn’t help. The fact that our NII grew in double digits shows that the strategies for disciplined growth have paid off and now, as the market improves, we should be able to grow as well as maintain our margins. should be able.

What are the reasons for the increase in agricultural bad loans?

As far as the agriculture loan book is concerned, we are seeing an improvement in terms of stress. I do not believe there is a trend that suggests that we should have higher non-performing assets compared to historical levels. There are isolated incidents in particular areas where there may be some temporary challenges but not completely over the book.