Hope to sustain 25-30% loan growth ahead: IndusInd Bank

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Hope to sustain 25-30% loan growth ahead: IndusInd Bank

Romesh Sobti, managing director and chief executive officer of IndusInd Bank said, "Saving bank customer is important to us from cross sell point of view. Also, in the short run there is some opportunity to move saving bank balances which are above say Rs 50 lakh."

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about IndusInd Bank See previous management interviews See what other Experts & Brokerages are saying about IndusInd Bank IndusInd Bank BSE | NSE 28/05/12 Are Mutual Funds betting on IndusInd Bank?

Along with Yes Bank and Kotak Mahindra Bank, IndusInd Bank also heralded the rise in savings rate on the back of savings rate de-regulation bought about by Reserve Bank of India .

Romesh Sobti, managing director and chief executive officer of IndusInd Bank speaking to CNBC-TV18 said the bank's objective behind this move was to accrue new customers.

"Saving bank customer is important to us from cross sell point of view. Also, in the short run there is some opportunity to move saving bank balances which are above say Rs 50 lakh," Sobti said.

IndusInd Bank expects to sustain 25-30% loan growth ahead. "Our balance sheet is pretty small. Our loan growth is not indicative of loan growth in industry because we grow higher than the industry between 25 and 30%. Going forward also we will sustain that sort of a growth rate," Sobti added.

Below is the edited transcript of Sobti's interview with CNBC-TV18's Latha Venkatesh and Gautam Broker. Also watch the accompanying video.

Q: Since the time you have increased the savings rate in your bank how much have you been able to garner by way of low cost deposits?

A: It is still early days to see any trending. Our purpose in raising savings bank rates was twofold. We like to accrue new bank customers. We have acquisitions rate of between 50,000-60,000 per month and we wanted to increase that rate.

This is because saving bank customer is important to us from cross sell point of view. Also, in the short run there is some opportunity to move bulk SA. Bulk SA means saving bank balances which are above say Rs 50 lakh. So, there is some opportunity there but it is still early days to see a trend.

Q: What kind of margin impact would you see because of the increase in cost of funds? Where do you see your NIMs in the second half?

A: Our SA basis is pretty small, so our CASA was 27%; our SA was about 9%. If we factored that in the overall cost of funds then the cost of funds goes up by about 6 or 7 basis points. So that's not a very significant increase. But we do hope that this will be neutralised by reduction in the overall cost of deposits if we managed to get in the bulk saving banks.

Q: What's your sense of where rates will stabilize? Do you think bigger banks will actually follow suit and increase rates? Do you think at some point you perhaps again have to get back to the moderate rate you were offering earlier?

A: If you just look at the economics of savings banks then it is commercially unviable to give a saving bank customer a rate which is higher than the 90 day fixed deposit rate in the long run. Ninety day fixed deposit rates in the long run once you have stability in inflation should be in that whatever 4.5-5% range we have seen in the past.

Because there is a huge transaction cost also to saving bank accounts. So they will stabilize around the 90 day fixed deposit rate once inflation is controlled. As far as the big boys are concerned, likely to say if you had that sort of level of saving bank account then you would also wait and watch  and see trends and then react rather than sort of raising rates right away.

Q: What's your outlook on loan growth for the industry? You saw a decent growth in advances in Q2. Do you think that rate is sustainable going forward?

A: Our balance sheet is pretty small. Our loan growth is not indicative of loan growth in industry because we grow higher than the industry between 25 and 30%. Going forward also the throughput we are seeing will help us sustain that sort of a growth rate. But for the system as a whole certainly we are sensing is that we have gone off the high of 24% we had in the last quarter of 2010.

Since then every quarter we see a slight reduction of 1 or 2% in the growth rates. So certainly, the trending is downwards and the non-working capital sector certainly seemed to have been slowing down faster. I would see some degree of stability in that 17-18% growth rate for the industry as a whole.