No negative infra surprise; focus on savings A/Cs: ICICI

After announcing ICICI Bank's quarterly results to the press, MD and CEO Chanda Kochhar explains on CNBC-TV18 that the bank expects no negative surprise from the infrastructure sector. Kochhar adds that the bank has placed current focus on the savings-account customer by launching a programme that rewards every savings-account transaction.

Also Read: ICICI Bank Q2 beats forecast, net up 30% to Rs 1,956cr Below is an edited excerpt of Chanda Kochhar's interaction with the press including CNBC-TV18's Gopika Gopakumar. Q: What is the status of your deposits? How different is your reward plan from those of other banks and what do you expect to achieve as the saving rates at private-sector banks are usually very high?
A: Our deposit base has grown 15 percent year-on-year and this has resulted in total deposits of Rs 2, 81,438 crore. Our growth in CASA (current and savings accounts) has been healthy and the savings-account deposits have grown by 15 percent. So the total savings-deposit base is
Rs 81,000 crore. Almost 70 percent of the total deposit base constitutes deposits from the retail.
The new reward programme, 'my rewards', that we have launched for savings-account holders is unique because our savings-deposit customers will be rewarded for every transaction and not just on new business. So in a way, it's our approach and initiative to build a long-term relationship with our customers as transact and use our products and services.
We believe that the savings account is a transaction product. The customer uses fixed deposits for taking benefit of interest rates and we have a very competitive interest rate for fixed deposits. But as the rest of the customer’s funds are deposited in the savings account, we will be giving them continued benefit for using their savings-accounts. Q: You have cut home loan rate by 1 percent. Do you think after December 31 you would be able to maintain this rate or do you have plans of extending it further?
A: For now it is a festive offer and is valid for the festive season. But going forward, interest rates will depend on the broad economic scenario. Q: You have maintained margins at 3 percent. Going forward, do you expect any kind of a pressure on margins?
A: No, our target is to at least maintain the margins at 3 percent. Though we plan to improve margins slightly, we definitely will maintain them at 3 percent. Q: By how much has credit grown? What have been the main drivers for the growth of your corporate and international books?
A: Our credit growth has been around 18 percent on a y-o-y basis for this quarter and is quite well-diversified. The retail portfolio has grown by about 14 percent. The international book has grown by about 6 percent and the rest of the growth is in the domestic corporate book.
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On the corporate front, the growth is partly due to growth in working capital because as a company's sales continues to go up, revenues continue to go up and causes the working capital requirement also to go up. Additionally, there have been drawdowns for the earlier projects that we had sanctioned and had started implementation a year or two years ago. So, it’s mainly these two factors that are driving corporate credit growth. Q: What about the international book?
A: The international book has grown by about 6 percent partly due to the exchange rate and due to some new disbursements. Q: With regards to asset quality, have there been any other fresh slippages in this quarter and how confident are you of making any recoveries from Deccan Chronicle going forward?
A: As far as the slippages are concerned, our asset quality broadly continues to remain stable. Even in this quarter our total slippage is about Rs 1,220 crore and this takes into account the full Rs 500-crore exposure of this one particular company we spoke about.
In the past many quarters, our slippages have been in the range of Rs 800-900 crore. So that continues to show that our slippage, keeping aside this one particular company actually continues to remain very stable.
This is consistent with what I have announced at the beginning of the year that overall asset quality will be under control. Specific projects will be monitored and some will slip into NPAs while others will have to be restructured. Overall, even our provisioning requirements will be within that range of 0.75 percent announced at the beginning of the year. Q: How confident are you of making recoveries on Deccan?
A: Since we don't talk about specific cases. I would prefer not to talk about that. But to give some comfort, we have already provided for 85 percent of the exposure. Q: The finance ministry has estimated that infrastructure projects worth around Rs 3 lakh crore will go bad in the next six-to-eight months. Do you expect pressure or stress from the infrastructure sector?
A: We will have to continue to monitor these infrastructure projects. There are some projects where the COD would be delayed and there are other projects where even if they commence commercial operations, the raw material that they had planned to start the project with, is not readily available. So they either have to import or they have to wait for allocation. In that sense, cash flows for these projects would be delayed compared to what was envisaged at the time of the appraisal.
But finally that impact it has on servicing of the debt really depends on the amount of raw material that is available. If a plant instead of operating at 90 percent, operated at 65 percent, they can still service the interest and at newer projects we must remember the principal repayment begins only two years later. So to that extent, those projects can still meet their debt obligations.
But if there are certain projects, for example any gas-based project which does not get any raw material and doesn’t operate at all, then it is very difficult to meet the obligations.
So it depends on the composition of the projects for various banks in their portfolios. We are monitoring each one of our projects. I do think that some may get added to the restructuring portfolio.
But broadly even after taking all that into account, we feel that there is going to be no real big negative surprise and that our provisioning is going to remain within that range that we had articulated – about 0.75 percent of the loan assets.