Ratnagiri Gas & Power still a standard asset: IDBI

A: It is a strong positive signal from Reserve Bank of India (RBI), a cut of 25 bps in the benchmark rates and it will trigger lot of things as it seems to have already. Base rate cut would be looked at by individual banks and they would take a call individually depending upon their own position but it is definitely a strong basis for considering a base rate cut.

Sonia: When do you think lending rates will go down?

A: If base rates are cut obviously lending rates will move down.

Sonia: What could the timeline be?

A: As we are aware already rates have been in soft zone for quite some time because of subdued credit demand and plenty of liquidity availability. Now, since benchmark rates have been cut, it gives a very strong signal across the board that easing of rates has begun, so people will take a call on their respective benchmark rates, base rates and whichever loans are linked to those rates they will automatically get the benefit if the base rates are cut.

Sonia: Will you be cutting deposit rates further, any time soon?

A: I cannot say anything for certain right now because this is a decision taken by Asset Liability Committee (ALCO) and as and when ALCO meets, will definitely discuss this and look at it.

Latha: What is the probability of this statement happening - deposit rates will immediately fall by 25 bps and lending rates by 15 bps – base rates?

A: Deposit rates have already been moderating over the last few weeks because they are not linked to any benchmark rate.

Latha: You won’t see them falling further?

A: Possibly they could fall somewhat further.

Latha: There is still a distance between you and State Bank of India’s deposit rates, in fact the entire banking system and SBI; SBI is still about 25 bps lower. You think other banks will now follow suit?

A: State Bank of India has been lower from beginning in terms of base rate because their overall cost being lower. However, every bank has to look at overall funding cost and take a call on the base rate. So, possibly it is for each of the banks to take a call depending upon their cost pattern.

Sonia: DLF was telling us that it will take about three-four quarters for real demand to pick up on the ground. In your sense how long could it take and also in terms of credit growth what are your estimates for 2015?

A: I have to look at two segments of credit demand if I want to answer this question – retail credit; retail credit typically response faster to a rate cut and this kind of rate cut which is across the board. So my sense is that retail credit would gain traction faster whereas corporate credit depends upon several other factors also though interest rate is an important factor but there are other factors as well. Four factors which are mainly related to policy action, they are also turning positive and therefore, one can see that investment demand also would pick up in the next couple of quarters.

Latha: What is the situation with Ratnagiri Gas? Are you all going to convert more of your loans into equity? What is your exposure both loan and equity?

A: We are one of the main lenders and we have converted some portion of debt into equity already but this is a temporary measure, this is just to tide over the current situation where the company is not able to --- not audible ----gas to meet the liabilities but the long-term solution is what we have been looking for and perhaps that is what would be as a discussion.

Latha: Can you tell us the numbers, your debt and equity, ICICIs and SBIs?

A: I will tell you aggregate numbers -- Rs 9,000 crore of debt is there. As far as the equity percentage is concerned, the institutions altogether hold nearly 24 percent of equity.

In any case this company is held by government institutions, GAIL, NTPC, government of Maharashtra and the lenders so it is virtually 100 percent held by government institutions.

Latha: The status of this debt is NPL or standard?

A: It is standard.

Latha: What are you expecting today? What is on the table?

A: We are expecting some way forward because all these stakeholders are meeting. They have to discuss various options. It is not appropriate for me to elabourate on those options but obviously the problem company is facing is that of coal availability and also pick up of power at an appropriate price by government of Maharashtra. So all these issues obviously will be under discussion.

Latha: But at Rs 5.5 per unit, will Maharashtra buy and will it be able to sell that power to anybody?

A: It is for them to take a call on that but if they are not in a position to buy, our sense is that at least they should permit the company to sell it to some outside buyers.