NIM to improve; maintain 0% NPA: GIC HF

Rajiv Dey, senior VP, GIC Housing Finance, says that we are witnessing a slight declining trend in the cost of fund considering our fund mix.

We expect the cost of fund to be at 9.9% and expect the same trend for the year provided there is no further correction either on the repo rates in the markets or further CRR relaxations, which could make funds easier to the market.
With the opening up of ECB and the bond market penetration, we expect to improve the NIM to 2.75%. GIC Housing Finance has significantly improved its asset quality over the years. In the last financial year end we had reported a net NPA of 0%. Below is the edited transcript of his interview to CNBC-TV18. Q: How has the cost of funds panned out in this quarter and do you think cost will reduce going forward as now you have permission to raise ECBs for low-cost housing?
A: We are witnessing a slight declining trend in the cost of fund considering our fund mix. Prior to this quarter, we were dependent on bank borrowings. The base rate mechanism has increased the cost of fund for housing finance companies like GIC Housing Finance Ltd. From this quarter, we are into the bond market and have been receiving a good response. We have closed a bond issue of Rs 125 crore at 9.45%.
We expect the cost of fund to be at 9.9% and see the same trend for the year provided there is no further correction either on the repo rates in the markets or further CRR relaxations which could make funds easier to the market.
We are also looking into ECB issue for affordable housing segment. As GIC HF, is working in this segment so there is a possibility of further decline in cost of funds. We are working on that modalities and will be able to comment in the next quarter. Q: Considering 9.9% as cost of funds then what will the outlook be on margins, net interest margins?
A: Our NIMs is at 2.5% and we are trying to maintain this NIM. However, in this scenario it was a big challenge to maintain the NIMs. With the opening up of ECB and the bond market penetration we expect to improve the NIM to 2.75%. Q: How does the asset quality looks? Many PSU banks reported a dismal asset quality. How is it held up at your end?
A: GIC Housing Finance has significantly improved its asset quality over the years. In the last financial year end, we had reported a net NPA of 0% that is no NPA, the entire NPA has been provided. We had a gross NPA level at 2.5% and we are working to over it to below 2%.
With the new NHP guidelines on provisioning, the delinquency buckets mentioned in that guideline, GIC Housing Finance has almost covered all its assets under the 100% provisioning, in this manner we have reached up to 0% net NPA. We expect to maintain NPA level of 0% and gross NPA level below 2%. Q: What about credit growth? Has there been any kind of moderation or has it held up in and will largely do what you have done in Q1?
A: After looking at the Q1, we expect a 25% growth in our loan book in FY13. On that line up to August we are seeing a growth in our loan portfolio, and a well balanced recoveries happening. The collection efficiencies above all benchmark collection efficiency rate. For GIC Housing Ltd, FY2013 would be a good year both in terms of business loan disbursement and as well as in recoveries.