IndusInd Bank reported a 25% jump in the net profit as the net interest income rose 22% while non-interest income surged 26%. Romesh Sobti, IndusInd Bank MD & CEO, told reporters that while banks are yet to pass on the rate cut benefits, they are under pressure to cut rates. Excerpts:
How will the bank utilise Rs 5,000 crore raised through qualified institutional placement in June?
It is growth capital, it will help support organic growth. It is not capital derived for a particular activity. So there is no conjecture around that.
With the industry is seeing a single-digit credit growth, can you explain how the bank managed to post 23% credit offtake in Q1?
There are two components to the credit growth story. The corporate book has grown around 27% and the retail part of our business has grown 18%. If you look at our retail book two quarters ago, the retail growth was only around 12%. Boost to our retail lending came from a turnaround in the vehicle financing business. We have grown 33% year-on-year in that business.
Can you give reasons behind the 27% growth in corporate credit?
We are mostly in the working capital part of businesses. The growth in corporate credit is on account of increase in the working capital limits, taking into account annual inflation rates. There is no new business that has been acquired. We are taking share in consortiums that we are present in. We are not shying away from taking that share.
Our exposure to industries is well spread. If you see our industry-wise breakup, you will not see more than 2-2.5% share per industry. The growth is mainly because of an organic growth, deepening of shares in our existing consortiums and a few new names.
You received CCI approval for the diamond financing business in the first quarter. Has it started reflecting in your numbers?
They are not reflected in this quarter, but that’s going to happen before the month end. It will definitely reflect in the second quarter.
How is the trend in commercial vehicle loans?
I don’t think there will be any major difference between last cycle and this one, except for the fact that the stagnation seen in the business has lasted too long. We have seen an increase in replacement demand. We anticipate fresh demand some time after September. The growth at the time will be much steeper. In FY15, our loan disbursal on automobile lending rose by around Rs 1,600 crore while in this quarter it is Rs 1,000 crore plus.
What are your views on transmission of repo rate cuts?
I think downward pressure on rates has started. Yields have moved down irrespective of whether base rates have fallen. The whole idea is that if you don’t cut base rate, you are not passing on the repo rate cut; is a misnomer. Transmission happens even without cutting base rates. You will see yields of banks going down because if credit is not growing, those who borrow, want it at a lesser cost. It is exactly what is happening especially with the AAA, AA, BBB-rated borrowers. They are already putting pressure on rates. There is some pressure even on the retail side.