See revival in loan demand in 6 months: Chanda Kochhar

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Chanda Kochhar, Joint MD, ICICI Bank , said it will take about six months for normalcy to return to loan markets. She stated that at current rates both corporate as well as individual customers are finding it a little unaffordable. "We have to wait for some of this correction to take place and that is when the momentum will start."

 

Here is a verbatim transcript of the exclusive interview with Chanda Kochhar on CNBC-TV18. Also see the accompanying video.

 

On bond yields:

Probably January is an aberration for two-three things. If you look at the 10 months number, the growth in credit has been substantial. What has specifically happened in January is the fact that bond yields have started moving in one direction, had started going down. So, that was a time when banks would have liquidated their bonds and started putting that money back into the lending market, but suddenly the yields which went almost below 5% have climbed up by 120-140 bps, so banks are right now waiting and watching. I guess when they see clarity on the bond yields they would liquidate some amount of money and start lending. I think it is an aberration but it has an important implication for the system. The earlier the clarity emerges on the bond yields, I think the faster the system would start moving again.

 

On demand for loans:

The demand is latent. It is not emerging as yet for two reasons that at these rates even people who want to borrow are finding it a little unaffordable. Again viability in a way gets impacted when the interest rates are high. Similarly, for retail borrowers while there is a latent demand people need homes but they are not sure about the perks and also are not sure if interest rates would fall down further. They are waiting for interest rates to fall down further. In a way the interest rates at these levels don't make the loans work for whether it is the corporate customer or individual customer. But there is a latent demand in the sense that people do need homes, there is a latent demand that gradually investments in projects, whenever, will come back. So, we have to wait for some of this correction to take place and that is when the momentum will start.

 

Earlier I would have said I would give it 3-4 months, but now I think I would give it six months.

 

On ICICI's exposure to Maytas Infrastructure:

We have exposure to Maytas Infrastructure not Maytas Properties. There are about 18 banks that have exposure to Maytas Infrastructure. The lenders are constantly meeting. Instead of divulging too many details as of now because nothing has finalized as yet, the intention of the lenders would be to act in a manner that the company doesn't come to a standstill and that is where the efforts are on.

 

On FDI:

Clarity has not emerged on ownership and control. If you look at our shareholding while 24% is domestic, 28% is by American Depository Receipts (ADR) holders, where all the voting rights are in favour of the Indian board. I think clarity should emerge in this direction and we have asked for clarity. Coming to the point of holding in the insurance company, in any case that ownership is governed by the guidelines of Insurance Regulatory and Development Authority (IRDA) through another act. In any case that does not get confused with this at all. So, that very much remains an Indian company.

 

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