What is your outlook on credit growth going forward and how did your retail loan business do this quarter
In terms of credit growth, there has been a slowdown in the vehicle finance business and disbursements were flat compared to a year ago.
But all indicators now point to some sort of an uptick in vehicle finance business and there is consensus on the bottoming out of the market. And, with all excess capacity used up, any new capacity creation will have to be through purchase of new vehicles.
Some of the numbers we have seen from vehicle manufacturers also indicate that the flow of manufactured units from factories into the sales pipeline has increased. However, the growth is quite slow and you wont expect a sudden uptick to happen before the next two quarters.
Your deposits have grown 12%. So, you see greater deposit growth in the coming quarters
What we have seen in the last four quarters is that our borrowings rose at a higher rate than our deposits. That is a balancing act we did to sustain our net interest margin and, thus, created a much better asset liability situation because the borrowings we have raised are of a longer tenor, stable and are even cheaper. Going forward, we think that as rates fall, we will certainly see deposit growth of above 20%.
Have you sold toxic assets to ARCs this quarter
There were sales to ARCs this quarter also, like every other quarter where we sell close to R25-30 crore of bad assets.
These are mostly on the retail side and are recovered within six months. We believe that our ARC portfolio will halve in the next six months. So, in the next six months, we expect our portfolio of bad loans going to ARCs to be around R69 crore from R138 crore now.
In any case, when we transfer an asset to ARCs, we write down the value of the asset and, thus, take the loss even before transferring it. So, we do not expect losses after sales to ARCs.
Do you see a cut in policy rates in the coming quarters
If you look at the tone of the credit policy review by the Reserve Bank of India, there was no reference to reduction of rates, but there was an assurance that rates would not be raised. I think that tone tells you what drives the regulator's perspective on rates and, clearly, it is inflation that is stickier than what we thought as both CPI and WPI have gone up. I believe that rates are going to remain elevated for another two quarters.