Shailendra Bhandari, MD & CEO, ING Vysya Bank, expects today's current account deficit figure to come around 5-6 percent compared to the estimate of 6.1-6.4 percent. He also believes that the market has already discounted the estimated CAD figure.
On credit growth front, ING Vysya expects to grow faster than the industry. However, the bank has witnessed a slowdown in sales of new homes. The credit growth has been around 20 percent in October-December quarter. Going forward, the bank's NIM is also expected to be in the range of 3.3 percent.
Below is the edited transcript of his interview to CNBC-TV18.
Q: What is your view on the current account deficit (CAD) figure, What do you think will the market see and what might be the reaction to something that is hugely different from 6.1 percent to 6.4 percent range?
A: The market is pretty much discounting the bad news. If the number is lower, then there will be a knee-jerk reaction. I think CAD will come between 5-6 percent rather than 6.1-6.4 percent. However, the trend continues to be extremely worrisome. Unless, we get a shocker number, it is discounted.
Q: What kind of reaction do you think it may warrant from the government? There have been talks about cutting the withholding tax on government securities, on debt? Do you think it may bolster the government for announcing more measures to attack the CAD?
A: Even if more money is permitted to come in and is invested in securities, then that will be on the capital account. This will not help the CAD to the extent that interest will be paid on those securities in future, and that worsens deficit. So, I think those are again the knee-jerk reactions, I would not like to see. Firstly, exports are slowing because the global economy is slow. Second, diesel caused a lot of problem to the CAD, so steps should be taken to curb consumption.
Q: The recent data from the Reserve Bank of India (RBI) suggests that retail loan growth is tapering off a bit and is getting increasingly difficult for private banks to retain their market share, especially in some of these secured retail credit products like mortgages or auto loans etc. Are you facing any kind of pressure and what would your loan growth targets be for the fiscal?
A: We will grow faster than the market and do at better quality. Coincidentally, we have done roughly 5 percent more than the market. Till December, the system growth rate of credit was around 15-16 percent and we were doing a bit above 20 percent. In retail under mortgages, there are two components. First, the home loans -- loans to buy new houses and second, loan against property (LAP) -- refinancing of existing property.
There is a slowdown in the sales of new homes and we believe that there is bit of illogical pricing. There are banks which are offering new home loans at below 10 percent while simultaneously taking deposits at 9 percent. We do not wish to play the probability game. Our LAP, SME lending, personal loans, credit cards and agriculture loans are all doing fine. I don’t see any particular issue for us growing faster than the market.
Q: In some of your key metrics like the net interest margins (NIMs) and the credit cost etc you are trading at a peak in terms of your efficiency at this point. How do you see a NIMs move from current position, do you think it could improve beyond 6.3 percent levels or given the kind of slowdown that is showing up in the economy could peter off a little bit?
A: Our bank had an average of 3.3 percent in last three years. In the December quarter it was 3.6 percent. For the last three years, it has been in the range of 3.3 per cent.
Within 3.3 percent, we do a typical high of 3.6 percent and a low of 3.1 percent. So, the previous quarter, 3.61 percent was the highest. We do have a seasonal impact, so our NIMs come down in March and June primarily because of priority sector and then they go up again. Our NIMs will be steady at an average of 3.3 percent or a bit higher going forward.
Q: The private sector banking universe has been through a bit of a confidence crisis through this month. State Bank of India (SBI) made the point that sometimes receivables being routed from private sector companies are much more difficult to pin down to in terms of who they are from, identity etc, the know-your-client (KYC) norms, would you say there is a lot more that needs to go through in terms of a cleansing of the system for the private sector space especially?
A: I cannot comment what other bank has said. If I look at the top private sector banks and include ourselves for a moment in that, our systems and controls are absolutely top class. ING Vysya Bank is part of ING, which is one of the global leading banks; some of our systems and processes meet EU standards. I even suspect that many may not achieve these for many years to come. So, I am not worried about these three-four banks including ourselves.