Investing Rs 25 cr in TReDS; to roll in 6-8 months: Axis

Almost a year ago, Reserve Bank of India (RBI) had come out with norms to set up Trade Receivables Discounting System (TReDS), a trading platform for micro, small and medium enterprises (MSME) receivables. And on Tuesday, Axis Bank received the in-principle licence to set up the trading system. Speaking to CNBC-TV18, Sidharth Rath, President and Head Treasury-Transaction Banking at Axis Bank, says the bank will invest around Rs 25 crore capital to set up the same. In another six-eight months time this process will be ready, he adds. On the future trajectory for asset quality, he says: "In terms of our overall stress projected for this year, it was in the range of Rs 6,000 crore and we are sticking to it."Below is the verbatim transcript of Sidharth Rath’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: When will this be up, this exchange and what kind of money can it mean for Axis Bank? A: We have just got the in-principle licence and now we will have to discuss with RBI on the process, how to go about it. Reserve Bank of India (RBI) has given certain guidelines for this. I think we will take about six to eight months to be ready with the process. I think the licence is valid for six months currently so during this period we will have discussions with regulators, find out what exactly are the nuances of this entire system and hopefully in the next six months to one year that is what is our feeling. Latha: How much money have you to invest? A: Under the guidelines which were there, there is a Rs 25 crore capital which has to be put in for this exchange. As you know, this is a capital light model as such because we are only putting in place an online platform where we are facilitating the MSMEs for discounting their receivables, providing them liquidity. This is only a platform so therefore it is not a capital intensive structure; it is online platform. As per the initial guidelines which were there, the capital which has to be infused is Rs 25 crore for this. Sonia: Just wanted to get a sense from your end on the kind of trajectory for Axis Bank as far as asset quality is concerned because that was the big worry in the last quarter, the way impairment levels for the bank have clearly been inching up higher. What is the trajectory expected now? A: We have been constantly guiding the market as such. In terms of our overall stress that we have projected for this year was in the range of Rs 6,000 crore and we are sticking to it. We are always guiding on the base of what is capital cost. The capital cost as such we are still maintaining that the capital cost will be in the range of 90 basis point; that is what we have been guiding. Latha: There is credit policy coming up on December 1. Expectations are that there will be no change in rates from the RBI. If that is indeed the case, are there any chances of deposit or a lending rate cut or a base rate cut from your bank? A: We will have to wait and see how the RBI comes up within this. If there is a cut then we will have to see how it works out; too early to predict for me right now. Latha: The mood of the market itself is pushing down the cost of money. I think last week not a very big bang but Federal Bank did cut its base rate by 30 basis points so anyways with or without help from the RBI, should we expect that banks will move before the year is out once again to cut base rates? A: It all depends on the rise in deposits also. As you know, over the last few months, deposit rates have come down and this has been passed to the customers through the cut in the base rates also. It all depends how the deposit rates in the near future behaves. If we see plenty of liquidity in the market and the pressure on the deposits eases, obviously banks will be inclined to pass on the benefits to the borrowers.