Average industry growth for FY17 to be around 10-11%: RBL Bank

The management of RBL Bank is hopeful of a good annual performance by the banking industry in FY17 on the back of better performance in the second half of the fiscal. The industry's average growth is likely to hover around 10-11 percent due to factors like normalisation of financial markets, stronger India position and rate cuts introduced by the Reserve bank of India, said Rajeev Ahuja, Head Strategy, Retail And Financial Inclusion at RBL Bank. Ahuja added that the monsoon too will trigger a recovery in rural demand which will reflect in banking sector growth. Below is the transcript of Rajeev Ahuja’s interview to Ekta Batra and Prashant Nair on CNBC-TV18.Ekta: One of the reasons that we got you on the channel today is because a brokerage, Citi has initiated coverage on the stock with a buy rating, target price of around Rs 350. And according to them, one of the key things that they expect is around a three-year compounded annual growth rate (CAGR) growth in your loans by around 35 percent. Just talking about loan growth we are getting into the festive season. How exactly is loan growth panning out for you at this point in time, pre-festive and what are you envisaging for the festive season compared to even last year?A: My apologies, I will not be able to specifically comment on RBL, we are on a quiet period. But I will give you a sense of what we are seeing in the industry. In general, the first six months are on the low point in most years. This year, we have seen a 9 percent plus growth year-on-year (Y-o-Y). Most of it has actually been driven by retail and I do believe that the next six months and perhaps 12 months, and I heard previous speaker talk about consumer spending and discretionary and consumption, we are going to see credit growth being driven around retail principally. They will be some amount of capital expenditure (Capex), but it will not be a large amount. We are looking at an average growth for the year of about 10-11 percent. So, the second half, will be stronger and the drivers for that really are a little bit of a normalisation in the financial markets, strong India position, liquidity, the rate cuts and in general, we believe the strong monsoon will also lead to recovery in the rural demand towards the latter half of the year.Prashant: I am sure that you have got this question before, but should one look at RBL as same episodes of investing in earlier private banks which have paid off well. How would you look at it? I am asking you and you are in charge of RBL and you should be prepared for an answer on those lines. But realistically, what should we expect? The market has also changed, many new competitors, new challenges, etc.A: I do not want to cop out from an answer, but obviously, this is a quiet period, but let me talk in general about how we are seeing the banking market evolve and how we have built the bank so far. We actually are very strong proponents of a secular growth in financial deepening across the country. There are many segments which do not have access to formal financial services. Now each institution has is strategy. There is some legacy, there is some interesting things, new business models. There is a lot which can happen even in the current constrained environment we see in terms of client engagement, acquisition of new segments, delivery channels, use of digital and other platforms. Data will play a big role and if you see some of the steps that the government has taken in the last 12-18 months, specific to around consumers, especially the rural side, the Jan Dhan Yojana, Direct Benefit Transfer (DBT), Aadhaar and I am not even factoring goods and services tax (GST) which obviously, has some more time from an implementation perspective.All these are very positive signs that subject to an institution strategy, there is a large potential of growing your business and we certainly believe that and we certainly believe that our growth parameters should reflect not just the market, but also our specific approach and given our small base and the work we have done over the last five odd years, we should be doing far better than the average of the market. That is the colour I can share with you for now. Hopefully, in a few weeks time, we will probably be more specific.Ekta: There seems to be rising interest in the microfinance institution (MFI) space. You guys have picked up stake in an MFI and a couple of peers have also indicated interest or picked up stakes as well. What is the rationale behind it? How much more aggressive could you be?A: Actually, if you see, this is another milestone on a journey which started five years ago, identifying the under-banked and unbanked segments as consumers of formal financial services in 3-10 years time. And pretty much, this investment is a reflection of that. We have grown our business around the rural under-banked and unbanked segments significantly over the last five years. We have created a strong platform. We are positive on the ecosystem, we are positive on developments around technology, as I mentioned Aadhaar, DBT, which will allow us to reach many more customers, either directly or in partnership with institutions which we have taken an investment in or otherwise to provide more and more financial services including lending payments, savings account, etc. So, we are quite strongly positioned for that and I am sure other institutions are figuring and doing their own stuff. So, there is a lot opportunity in the market. We do not think this is going to stop here and the evolution of this segment could be a very positive development for the overall banking segment as well as in the longer-term for the economy.