See no alarming slowdown in any segment yet: HDFC Bank

A confident Aditya Puri, managing director, HDFC Bank expects the bank to continue to grow faster than the industry. "Our growth rate is a function of GDP, if GDP grows at 6.5-7%, so the system will grow at 15-17%. We grow between 4-6% percent faster than the market; I don't see this trajectory changing," he said in an interview to CNBC-TV18.

Meanwhile, he added that the bank has not seen significant slowdown in any segment and lending to consumer segment has been robust. "We have had wage increases in and around the of around 10 percent, there hasn’t not been loss of jobs and demand exceeds supply. I do not see a major impact on the consumer."

The decline in interest rates for certain consumer loans is expected to continue unless growth rate picks up, he added.

Below is the edited transcript of Puri’s interview with CNBC-TV18.

Q: Your performance trajectory over the last many quarters and years has been incredibly steady infact almost boringly so, can you continue to be this 25-30 percent growth machine through what is a slow patch in the economy?

A: Being listed on the New York stock exchange, I cannot give a forward looking projection. Our growth rate is a function of GDP. To a GDP growth of 6.5-7 percent, the credit multiplier is about 2.5-3, so the system will grow at 15-17 percent.

We gain market share as a consequence of our products and geographic distribution and we grow between 4 percent and 6 percent faster than the market. I do not see any reason for this dynamic to change.

Q: Is there any sluggishness that you are sensing in the corporate or the wholesale market or do you think that is beginning to trough out and sentiment is turning around a bit?

A: Sentiment is optimistic. To expect sentiment to translate into reality so fast is a bit optimistic as well, but yes, the sentiment is changing. There is a lot of hope, Diwali is coming, the Gods are kind, so if we can get the things that the government has said that they will do, we are in for a good time. All of us should help the government in doing that.

Q: Did you sense till September some kind of sluggishness in corporate loan growth, retail has been doing well but in the wholesale market, did you sense some sluggishness and from which quarters did you sense the highest amount of reluctance or diffidence?

A: When the economy slows, there will be some slowdown in the corporate demand for funds, but the slowdown in the economy atleast now is largely a function of the delta required through investment. If we get investment, there is no reason why we should not be growing around 7 percent rate.

That said, there was slowdown and slowdown is naturally linked to the sectors like power, mining, infrastructure and telecom. As things slow down, there will be effects on vehicles, commercial vehicles etc. so there is some slowdown, but I do not think it was alarming.

Q: Did you sense any slowdown beginning to happen in the consumer space as well because still recently that space has held up remarkably well, do you see the need as a banker to try and restoke what seems to be a bit of a flagging or plateauing kind of demand from the consumer side as well?

A: Not really, as far as we see the consumer area, we do believe that at this point of time and I am petrified if the rate of growth would go much lower, but at this point of time, we have had wage increases in and around the 10 percent, there hasn’t been loss of jobs and demand exceeds supply.

I do not see a major impact on the consumer. Different products will grow at different rates at different points of time, so some sectors may see some slowdown. If one is represented across the entire spectrum of the consumer lending, then it should be alright.

Q: There has been some reduction in consumer loan rates across categories, would you classify that as a pure festive period kind of an offer or do you see them sustaining beyond the festival period?

A: Unless the growth rate picks up at this point of time, the demand for assets is such that you would see a drop in interest rates continuing.

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Q: So that will happen regardless of what the Central Bank guides or nudges you to do just purely because of market dynamics?

A: Some amount would happen irrespective of what the Central Bank does. If the Central Bank takes some positive action, there could be some fillip.

Q: Do you see substantial elbow room to lower deposit rates from hereon?

A: Not really. As far as deposit rates are concerned, there is a limit set by the national small savings rate where you start competing. They do not go below 8 percent depending upon the kind of asset demand, one could get some drop in deposit rates, but if there is a CRR and a repo rate cut then definitely, we will see a deposit rate cut.

Q: As a banker, do you think that over the next four quarters given growth dynamics and inflation dynamics, you could well see a down cycle in interest rates which is required to restore growth and to take some of the stress away from the sectors that you spoke about or do you think it is not a clear call that the next one year we will see a down cycle?

A: In the next one year, one will see a down cycle.

Q: Will it be a pronounced one?

A: That unfortunately being on the ground and cannot be only subject to intellect. I cannot answer that in much detail.

Q: What do you mean by a down cycle, 25-50 bps is hardly a cycle? That can also be a one off, what would you characterize as a cycle?

A: What I mean by down cycle is I am an optimist. I am saying if the global economy slows, we should see some improvement in the oil price, dollar rupee holds steady, inflation rate comes down to some extent, the monsoon has not been as bad as it has been, the deficit people are able to bring down to 5.3 percent, so we see some positive action from the Reserve Bank of India (RBI) as well.

When I say downward movement on yield, the downward movement on yield given current parameters, which I hope do change would be somewhere in 25-75 bps over a year. If you see the other trajectory exchange in terms of inflation and in terms of deficit etc, you could see a higher amount.