The Reserve Bank of India on Tuesday reduced repo rate by 25 basis points to 7.25 percent and kept the CRR and SLR unchanged. Speaking to CNBC-TV18, Hemant Kanoria, CMD, Srei Infra said that if the central bank would have cut 100 bps or 150 bps in one stoke then that would have had a better impact then 75 bps in there successive turns. “This is because then the interest rates would have come down substantially both from the bankers’ perspective and also what we are passing on to our customers,” he added.
Below is verbatim transcript of the interview:
Q: How would you read today’s repo rate cut of 25 basis points? Do you expect your cost of borrowing to come down and do you think you will be able to pass it on to your borrowers?
A: There will not be substantial reduction because those 75 basis points have been reduced over a period of time. But the banks have still not passed it to the customers and we have also not been able to pass it because it has not made that impact. I am not saying that RBI has not done the right thing.
RBI has taken the right step of reduction of the repo rate but it has to be done at one particular stroke to make an impact. So, if they would have done one stroke of either 100 basis points or 150 basis points, it would have made a better impact because then the interest rates would have come down substantially both from the bankers’ perspective and also what we are passing on to our customers.
Q: We were speaking to a couple of bankers. In fact the chairman of SBI, Arundhati Bhattacharya told us that they are seeing early stages of improving credit off-take. Your disbursements in FY15 were down to about one percent and your net interest income also in the last quarter was down 20 percent. Do you think it will get better going forward on the back of about three successive rate cuts?
A: Rate cuts are not going to make much of an impact because we are in the infrastructure business. Unless there are more investments coming into this sector, we do not see disbursements improving. But what we have done for SREI, the disbursements will increase because we have also diversified our portfolio into financing of medical equipment, agriculture equipment and IT technology equipment, so there will be an increase in the disbursements, but it will be coming from those sectors.
Maybe mining too, because the coal mines have been allocated so there would be mining contractors who will be approaching us for equipment. So, that would be another area where we can get the disbursement growth coming in.
Q: Would you cut your lending rates now by 25 basis points?
A: Difficult to say. As and when the banks do it, we will pass it on to our customers. But we are still waiting for the banks to do that. Today is too early to give any indication on that.
Q: Will you make sure that any move will be neutral on your margins?
A: Yes. It is not going to impact our margins.
Q: A word on disbursements growth from agriculture sector? You said that you are diversifying into the agriculture equipment. We just got a word from the MET department which lowered its monsoon target to 88 percent from 93 percent. Do you think a deficient monsoon will affect your disbursal in the agriculture equipment sector?
A: No, we are not that large at this juncture in the agriculture equipment segment, we have just started since year before last, so we are still very small and it is not going to make any impact on our growth.
What we are looking at is introducing mechanisation through equipment in the farming techniques itself which will improve the productivity and the production for the farmers and that is what we did 25 years back for the construction segment because the construction segment when we stepped in in 1989, they were basically doing all the work which was manual.
When we started equipment financing, a lot of mechanisation was brought in, the work was faster and the quality was better, so that is exactly what we are trying to introduce now in the agricultural segment. So, it is going to be slow increase, it is not going to be rapid immediately but it will be sustainable.
Q: What will your disbursement target for FY15 be then in that case?
A: It will be higher than last year but I would not like to make any conjectures on the numbers because we are a listed company, therefore, I would try not to make any definitive, figures we will not be able to say.
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