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Last Updated : Sep 01, 2015 01:09 PM IST | Source: CNBC-TV18

Need to look at absolute figures of CV pick up: M&M Fin

Welcoming the rate cut by HDFC Bank, Ramesh Iyer, MD, Mahindra & Mahindra Financial Services says he hopes others in the system follow the lead that will help companies with sizeable borrowing in their books.


Welcoming the rate cut by HDFC Bank, Ramesh Iyer, MD, Mahindra & Mahindra Financial Services says he hopes others in the system follow the lead that will help companies with sizeable borrowing in their books.

"So far as loan book is concerned, it's difficult to put out a number but ultimately we are all enablers, waiting for the auto, tractor, pre-owned vehicle market, commercial vehicle market to improve. If that had to happen then of course the enablers will be the beneficiaries."

Below is the transcript of Ramesh Iyer's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Latha: What is the reaction to HDFC Bank's rate cut? How does that change life for you?

A: It is always a welcome change when the rates come down. I think everyone has been waiting for the rate to come down, but more importantly, if a bank has taken a lead, we will we see many more bankers looking at this direction and if that had to happen then I would think the one who has decent borrowings from the banking system will definitely get the benefit of such rate drops.

Sonia: In terms of higher loans, how much do you think it could help this 35 bps rate cut and what are you looking at in terms of your own loan growth by the end of FY16?

A: In terms of rate benefit as you asked about, HDFC is just one of the borrowing from the total borrowing, so it will be a fractional benefit but ultimately there is a directional thing that one can look at -- will many more banks follow and if that had to happen then we will have some benefit coming in because of the dependence on the bank borrowing.

So far as loan book is concerned, it's difficult to put out a number but ultimately we are all enablers, waiting for the auto, tractor, pre-owned vehicle market, commercial vehicle market to improve. If that had to happen then of course the enablers will be the beneficiaries.

Latha: How does life change for you? What percentage of your loan comes from banks and do you just have to pass on this 30 bps if you get lower cost of money. You just have to pass it on as cheaper loans?

A: If you look at it, about 40 percent plus of our borrowing comes from the overall banking system and for quite some time all of us have been absorbing whatever the cost increase. If all the banks follow the rate cut direction and if we were to get all of that, then surely we will also readjust our lending rates but not necessarily all the rate that we get as benefit will immediately get passed on because they won't all come on day one.

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Latha: Generally for the system as a whole there is 30-35 bps or 40 bps rate cut. Will that increase loans in the next couple of months?


A: I think at least the sentiments turn positive when there is so much pressure on the system for everything and if any positive step that gets taken -- first of all it changes the sentiment more favourably and when they get passed on to the borrower, there will be some benefit but I am not too sure at the retail levels of vehicle buying etc, these kind of small rate cuts is something that is waiting for the volumes to improve.


Sonia: As of now you will not pass on this 35 bps rate cut immediately?

Close

A: Let it first come to us. Once we get it then we will decide how to do it but this is just a hearing that rate cut has happened and its one bank now, but we will have to wait for directionally is it from the banking system and therefore does every bank that we borrow from give it and how fast do we get it. Once we have it, we will also relook at the pricing.


Latha: Everyone is talking about commercial vehicle (CV) cycle pick up and it's seen in Ashok Leyland's numbers. Is not that showing up in your loan growth?


 A: We should not forget that we have been talking from a very low base when we talk of a growth rate. I think one has to look at the absolute volume and we are not a very significant CV player in any case for making a comment on the loan book growth but the absolute volume will have to overall increase while the growth rate is one indicator of moving positive.


Sonia: Your asset quality has been substantially weakening in the last many quarters. Since we spoke with you last, has the situation improved or do you think that the worse is yet to come?


A: It's too early to comment. The next two quarters always are the best quarters for anyone who operates in the rural market. So I would restrict my comment.



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First Published on Sep 1, 2015 10:00 am
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