Please give us a break-up of your advances growth. Have you seen any hit on account of demonetisation?
The overall growth rate, as you can see, if you look at the home market, is 17.5%. It’s come about from 17.8% in retail and we’ve got 16.8% from wholesale. There’s not much of a difference between the two segments in terms of growth. Two-three segments would have had a bit of an impact for the quarter. One is linked to what loans got repaid in terms of some cash credit or overdraft facilities because customers deposited some amount of currency in their bank and reduced their borrowings. So that wil take off Rs 2,000 crore from some of the business banking and some of the SME book. On the retail side, where the underlying businesses in terms of, say, sales of two-wheelers or used cars or some part of CV (commercial vehicles), wherever we found that the underlying products were impacted, naturally there was some moderation in the demand for loans and, therefore, loan growth.
Why has other income growth been muted?
The bond gains, if I look at the December 2015 quarter, profits on sale of investments were about Rs 328 crore out of a total other income of Rs 2,901 crore. For this quarter, the profit on investments is Rs 399 crore. It’s up 21.6% over Rs 328 crore in the corresponding quarter of last year and that Rs 399 crore is out of a total of 3,143 crore. It has been, give or take, in the region of 12-13% range of the total other income and to be fair, this quarter it has grown a little faster than the overall other income, which grew at about 9.4%.
There certainly would have been an impact of demonetisation on fee income simply because as you are well aware, the number of fees that banks would earn in a BAU (business-as-usual) scenario were zeroised for this quarter. So if you look at ATM fees, if you look at the entire card fees on debit cards, the merchant acquiring – all of those, as you know, for this quarter were zeroised.
With the latest round of rate cuts by banks, how do you see loan demand?
To be fair, with the last reduction, that part of demand which was being held back by customers who were waiting for that change in rates, I think that now has largely gone through. If you look at the MCLR reductions we all did, which were very sizeable, in January and all the deposit rate cuts were done between November-December. So, whatever deposit rates you are currently seeing have already been factored into the January MCLRs. So, unless there are further deposit rate cuts, the immediate expectation of at least MCLR changes would be negligible. Whatever change has happened on the retail side, linked to competition or to other market factors, will continue to happen, but the reality is that you’ve already seen a fairly sharp decline in lending rates, including on the wholesale side because of the MCLRs. To that extent, the interest rate cut egging on for borrowing is done. Now it is pretty much linked to what happens to underlying demand itself.