Ravi, CFO, Mahindra & Mahindra Financial Services, was optimistic about maintaining growth and observed that there was sufficient liquidity in semi-urban and rural India. Ravi also ensured that the company was able to maintain the low NPAs from the start of the year.
In an interview with CNBC-TV18, V Ravi, CFO, Mahindra & Mahindra Financial Services, explained the fall in the cost of funds after the recent CRR cut undertaken by the RBI and a possible cut in repo rate in the April credit policy meet.
He is optimistic about maintaining growth and observed that there is sufficient liquidity in semi-urban and rural India. Ravi also stated that the company was able to maintain a low NPA rate and hoped to have it under control.
Here is the edited transcript of his interview with CNBC-TV18. Also watch the accompanying video.
Q: By how much will your cost of funds decline in the next one or two months when either the cut in CRR or an expected cut in repo, of about at least 25 bps, are out of the way?
A: Our bank borrowings are linked to the base rate. So as and when there is a cut in CRR and repo rate cut happens, the interest rate eases and the banks try to pass it on. If the repo is cut by 25 bps, there is a corresponding fall in the base rate by 25 basis points. We should get a benefit of 25 basis points in our borrowings from banks as roughly about 50% of our borrowings are from banks.
Q: What is your wholesale cost of borrowing aside from just bank-lending?
A: From April 2011 till date, the rates of commercial paper (CP) have jumped by almost 3%. In the last two to three weeks, it has jumped by 1% and the cut in CRR has infused about Rs 40,000-50,000 crore in the system till March 15, which is when the advance tax would be tightened.
So, the rate may not go up further and might be stable. Thereafter, I expect a minimum cut of about 25-30 basis points. I expect it to come below 11% the moment this advanced tax disappears.
Q: Are you seeing that happen in the April-June quarter?
A: Yes, it will happen about one-and-a-half months down the line in the next financial year. Till March end, the tightness would continue from the advance tax period. But thereafter in April-May, we can expect some sort of easing in short-term rates. It would probably be in the region of 9.50%-9.75% somewhere in the May-June quarter.
Q: What about growth?