Investment cycle in the private sector is negative, and capacity utilisation is still only around 70 percent. KVS Manian at Kotak Mahindra Bank feels utilisation will likely cross 80 percent over the next 9-12 months and trigger the next round of investments.
Speaking to CNBC-TV18 from the sidelines of the Kotak Conference, Manian said credit offtake is sluggish on the corporate side, but there is some traction on the retail side.
He is confident Kotak Mahindra Bank will grow its credit book even in a scenario where the system is not growing. "We continue to gain market share and we are focused on growing our good credit quality book,” he added.
He said there is stress in the banking sector. Some parts of this sector are paralysed and banks are unable to grow their books. This is an opportunity for a bank like Kotak to grow the credit book.Below is the verbatim transcript of KVS Manian's interview to Ekta Batra & Prashant Nair on CNBC-TV18. Ekta: I want to talk about credit growth this quarter. Kotak seems to have outperformed the market with around 12 percent growth this quarter in terms of loan growth. What is your sense in terms of what credit growth is looking like going forward as well as which are the sectors that you will be focusing on or where are you facing the most amount of traction? A: I have always maintained this that it is a huge market. Overall the market doesn't show any credit growth on the corporate side. There is some traction on the retail side but the corporate side sell is sluggish, Reserve Bank of India\\'s number shows that. However, the way I look at it is that for a bank like us it is possible to grow the credit book even in a scenario where the overall system is not growing by gaining market share and that is what our focus is. So we continue to gain market share and we remain focused in growing good credit quality book and given the overall stress in the sector where some parts of the sector is kind of paralysed, where they are unable to grow their book. I think it is an opportunity for a bank like us to grow the credit book. So I do not see sectoral pattern to this. Yes, there are a few sectors like road, power especially renewable energy sector where there is growth but Kotak is not a long-term project based financing bank. We try to remain at the shorter end and even if we do some long-term, we are highly selectively with extremely good quality sponsors or strong project kind of situations. So we remain selective but there is opportunity in the market to grow the credit book and we continue to be focused on that.
Prashant: Credit growth has been lacklustre on the corporate side for a while but are we getting at some sort of an inflection point because there is no real big core sector activity on the ground which would need funding? A: The private sector investment cycle hasn't turned positive. I think still capacity utilisation from last data available are closer to 70 percent and till the capacity utilisation cross 80 percent, which I am hoping that by the end of this year we will see that kind of a number and that is when the private investment cycle will turn. So I am optimistic that over the next 9-12 months the cycle will turn and positive cycle will begin and investments will happen. However, unless private investment happens, growth has to be at the cost of other players in the sector and unless a broad based growth happens in the economy, it is difficult for the banking sector to grow the corporate credit book. Therefore, as I said I am optimistic over 9-12 months that it will happen. And as I said earlier as well, we are remaining focused because we think for a bank of our size; it is still possible to grow our book by focusing on good quality clients and acquiring them. Obviously, it comes at the cost of sector and therefore, we gain market share.
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