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Last Updated : May 04, 2011 05:26 PM IST | Source: CNBC-TV18

Foresee no major slowdown in operations: M&M Financial

V Ravi from Mahindra & Mahindra Financial Services, in an interview with CNBC-TV18's Latha Venkatesh and Anuj Singhal, analysed the impact of the credit policy on non-banking financial companies (NBFCs) and banks.


V Ravi from Mahindra & Mahindra Financial Services, in an interview with CNBC-TV18's Latha Venkatesh and Anuj Singhal, analysed the impact of the credit policy on non-banking financial companies (NBFCs) and banks.


Below is the verbatim transcript of the interview. Also watch the accompanying video.


Q: One of the points made in the policy was that any bank lending to NBFCs will not be classified as priority sector. Do you get any bank loans which are classified priority?


A: Yes, we get bank loans. We lend for tractors and commercial vehicles. Hence, we get some portion of our lending from banks as priority sector lending. This mention of priority sector lending comes under Malegam committee recommendation in the monetary policy.


Malegam committee has been formed for micro finance companies lending. We are seeking a clarification from RBI and the banks on this issue.


Q: We got the clarification yesterday that any loan to NBFC will not be classified as priority. Assuming that as an explanation, what would be the increase in the cost of money? How much do you get under priority sector? How will it be differently priced?


A: Roughly, about 22% of our lending comes under priority sector. We get around 50 basis points cheaper compared to the normal loans. The effect on our cost of borrowing would be in the region of about 70-80 basis points.


Q: We have seen some slowdown which (commercial vehicle) CV manufacturers are expecting. What is your own sense? With interest rates going up and projection of this slowdown both by the Reserve Bank and others, are you expecting your loan off take to fall as well your margins to get impacted in FY12? What numbers are you working with?


A: Primarily, we are in interiors and rural India. We still see tremendous buoyancy in the rural cash flows. We do not foresee any major slowdown in the domain of our operations.


We would continue to be optimistic and will look forward to sustained growth, especially in the wake of the normal monsoon announcement. With respect of cost of money going up, we are intermediary and money is our raw material.


For incremental borrowing of our company, cost of money would go up. We will have to review the situation and see how much we can pass on to the customers.



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First Published on May 4, 2011 03:04 pm
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