While the country’s most valuable bank, HDFC Bank, reported an over 20% rise in its Q1FY17 net profit, for the second successive quarter, its bottom line growth trailed that of its top line. Interacting with reporters after the announcement of results, deputy managing director Paresh Suthankar spoke about the reasons behind it and also how the bank managed impressive advances and deposit growth. Edited excerpts:
Can you throw some light on the reason behind the rise in non-performing loans (NPLs)?
About 40% of the increase in NPLs can be attributed to the SME segment. However, I don’t think this is too sharp an increase or an increase that takes us to a level of NPL in this business that puts us off it completely. All I am saying is that we have seen a handful of names that have crossed over this quarter. It happens every now and then. The way the economy is panning out, this is a segment that will see ups and down. Hence, we will continue to grow in a cautious manner. SME is always a risk-reward play off.
Given that your deposits grew at 18.5% (y-o-y) this quarter, which is double the rate of growth of the banking sector as a whole, tell us from where are they coming from.
The good part is that the growth has come from both current account and savings account (CASA) and non-CASA deposits. The CASA deposit growth of 22% has come from a combination of new customer acquisition and higher penetration of existing customers. When it comes to the latter, our digital initiatives have made customer experience smoother and better and has strengthened existing relationships, resulting in higher penetration and increased average balances.
Can you elaborate a bit on the growth in advances in the retail as well as in the wholesale segments?
Both the segments have grown exactly at 24.5% as per Basel II classification. From a business perspective, the retail business has grown a bit faster than the wholesale business. Two of the largest components of the retail segment — auto and commercial vehicles (CV) — have grown at 18.9% and 18.8% respectively. The credit card business has grown at 26%. Personal loans have grown at 41%. Even home loans, which are now pretty large at Rs 33,000 crore, have grown at 25%. As far as the wholesale segment is concerned, we have had some brownfield expansion related term loans, both medium and long term. There have also been some refinancing opportunities, wherein corporates, given that interest rates are lower, have refinanced certain projects that are complete.
Has any large account turned NPA this quarter?
We don’t have any large corporate NPA this quarter. We might have something in the mid-market, SME and retail segments. So, its a little dispersed and therefore, there are no serious, large or chunky items.
Have you made you counter cyclical provisions this quarter?
Yes, we have made some floating provisions of Rs 25 crore.