No big impact of Chennai floods on asset quality: Repco MD

Repco Home Finance has decided to provide repair loans at a reduced interest rate of 8.5 percent for flood affected residents of Chennai. Chennai is a key market for Repco; 17 percent of its loan book is in areas hit by the flood. However, only 2-3 percent of the customers have been affected by the floods and impact on business and asset quality is not much, says R Varadarajan, MD of Repco.In an interview to CNBC-TV18, Varadarajan says the company has a total of 146 branches, 11 of which are located in flood impacted areas of Chennai.He says the company will be able to maintain growth in loan book in the second half of the fiscal as well.Below is the transcript of R Varadarajan’s interview with CNBC-TV18's Nigel D'Souza and Reema Tendulkar. Nigel: We are aware that you have close to around 50 percent exposure to south India. Could you tell us what is your exposure particularly to Chennai and in fact what kind of impact could the floods have going ahead? A: We have made a very detailed analysis about the impact of the floods in our portfolio. So, I would like to tell you out of 146 branches of Repco Home Finance only branches located in 11 branches are only in the flood affected areas and we have also seen around 17 percent of our loan book is in that area but actually we estimate around 2-3 percent of our loan customers are only affected but what we have decided is it is an opportunity to serve them down because we do not see any major impact on our parameters because of this flood. But at the same time those who are affected we should give a helping hand. Therefore we have come out with special schemes for them because 57 percent of our loan book is by non-salaried i.e. business sector. Naturally their business income will get affected in this month and next month. Therefore we have advised them, they can postpone about 2-3 instalments without any penalties. This is with the National Housing Bank (NHB) norms. Another one is wherever they require additional loans for rebuilding their houses, repairing and all we have been extending them helping hand with a very low rate of interest. NHB has come out with a new scheme by which loans up to Rs 10 lakh for this repair and renovation can be given at about 8.5 percent interest. And they give refinance to the housing finance institutions at 6.5 percent of the two percent spread. So, we are making use of this scheme and making helping hand. So, according to me this flood is an opportunity for us to help them. Otherwise it may not have any major impact on our parameters. Reema: But it is still 17 percent of your loan book in the flood affected area. 2-3 percent of your customers you are saying could be impacted. Will it not affect your asset quality at least in the near term, say in the December quarter, will we see it spike yup your gross non-performing assets (NPA)? A: No, not at all in the sense they are all standard assets and when we give them the reschedulement of some 2-3 instalment postponement for them naturally it will not affect our asset quality because again they will pick up after two to three months and they will not be classified as NPA right now as per NHB norms when we give them two or three months repayment postponement. Nigel: But also things were looking very good for you. I remember we spoke earlier this year as well in August if I am not mistaken. You had given us a guidance of around 25-30 percent growth. Does that stand intact? A: Naturally, if you see even the September results we see that the loan book growth was around 31 percent and for the rest of the half year also we strongly believe we will be able to maintain that same trend. Nigel: What about disbursements? They have come in higher by close to around 40 percent, third or fourth quarter running. Do you believe that you can maintain that run rate as well? A: Yes, naturally. There should be no difficulty for us for that. Reema: Part of your growth has also come in by increasing the ticket size. So, what does the ticket size currently stand at and how much will you go up, have you targeted any ticket size that you wanted to reach, say in the next few quarters? A: No, as a policy we always concentrate on this low ticket size of around Rs 10 lakh category. So, right now in the last 2-3 years the average ticket size have gone up from Rs 10 lakh to Rs 13 lakh. So, the loan book growth does not come mainly from the ticket size increase but it actually coincides with the inflationary trend there. Nothing more than that. Otherwise we would like to concentrate for this segment only. Nigel: You said that your total number branches are at around 145-150 odd. They have been added by close to around 50 branches in the last one year or so. Going ahead what kind of branch addition are you targeting? A: We have a very standard policy of growing in the contiguous state. So, we would like to reposition ourselves in the state where we are very strong, like in the southern states. So, we would like to open around 15 branches in a year of which around 10 maybe in the existing geography and around five maybe in the new geography, that is our policy.