Inflows of Rs 2000 cr due to demonetisation: Lakshmi Vilas Bank

A: We have seen the steady inflow. I would imagine at the last count it would have been somewhere in the region of about Rs 2,000 crore.

Prashant: Let us assume that half of it goes to savings, half of it goes to fixed deposits, etc, so blended you would have paid out 5.5 percent odd or so. Have you calculated after the weekend move by the Reserve Bank of India (RBI) what could be the cost to the bank. Let us assume the cut off as December 9, a two week period from November 28 to December 9, what is the cost to Lakshmi Vilas?

A: We haven’t really computed the exact implications yet. However, I can say that there will be some effect but I think it is something that we can take in our stride.

Reema: Will you look to cut your retail term deposits at least immediately in order to offset some of this cost. Is that something on the cards?

A: We have done that already. We have cut rates quite a bit over the last month or so and at appropriate times the Asset Liability Committee (ALCO) will take a view I imagine.

Reema: There is a likelihood that deposit rates will come down?

A: I still think so. Despite the RBI action I think deposit rates will head down.

Prashant: In your assessment and this is just stepping back a little bit so RBI today we understand is infusing money via repos, it sucked out liquidity via this 100 percent CRR, it was infusing via reverse repo, could you tell us according to you as a banker what is the game plan here?

A: It is just a question of matching day-to-day now. Through the repo of course day-to-day liquidity is being managed.

Prashant: Do you expect more repo? Would the banking system need more?

A: I think so.

Reema: What has been the impact on loan growth in the last two weeks once this demonetisation was announced?

A: I am afraid on the loan growth front it has been negative in the sense that in the first place there have been some prepayment of loans. I haven’t really seen too much of fresh demand, so, I would imagine in the short term the impact is negative as far as growth is concerned.

Prashant: Especially on agriculture, micro, small and medium enterprises (MSMEs), retail, would the impact be more?

A: Yes, I would say specifically SME. So MSME would have seen the bulk of the repayments and the slowdown I imagine.