Despite a year-on-year jump in provisions, HDFC Bank reported more than 20% year-on-year growth in its net profit for the June quarter. In an interaction with reporters, deputy managing director Paresh Sukthankar said apart from some stress in its corporate and business banking books, the bank is seeing some repayment pressure in the farm loan segment. Edited excerpts:
What share of the provisions are for the farm loan portfolio?
If you look at the total increase in provisions worth Rs 700 crore, about Rs 200 crore is the general provision. Of that Rs 200-odd crore, about
Rs 120 crore was the incremental general provisions for the stressed sectors. Of the remaining Rs 500 crore of incremental provisions, 72% is for the agri portfolio, which includes what was the minimum requirement as well as some slightly higher provisioning which we’ve done for that portfolio as a prudent measure.
What would your outlook for credit growth and asset quality be?
On the credit growth front, we’ve seen healthy growth both in wholesale and retail. The home loan piece is about 15%, which is slightly slower because we haven’t taken as much back on our books. Pretty much across the entire range of retail loans, we’ve seen that growth. On the wholesale side, we’ve seen a spike in March, some short-term opportunities (that we availed of). A lot of those have been replaced by other core loans. So the year-on-year growth on the wholesale book is a little ahead of the retail book. On the growth side, not too much of incremental greenfield capex-related demand was visible, but the regular working capital, trade finance and some refinancing opportunities that have come our way, I think we’ve been competitive and been able to get that growth. As far as the asset quality is concerned, we’ve had some small slippages in the rest of the book, but the overall increase that we’ve seen of 20 bps, of that 12-13 (bps) is coming from agri. We’ll have to see how things pan out in terms of there being clarity on what are the waivers and what our customers will be able to repay from those and thereafter, once they can pay from their own pockets.
Have you taken the entire impact of the migration to the marginal cost of funds-based lending rate (MCLR) on your margins?
Absolutely. The portion of our book which is yet to move from base rate to MCLR is in low single digits now – about 5-6%, maybe. So we don’t really have a cliff which we need to go over in terms of conversion. Most of our floating-rate book is already MCLR-linked.
Deposits in the system have continued to grow even after limits on cash withdrawal were eased. Why has that happened?
From the peak deposits that came in during the demonetisation period, of course we’ve had some flows. But clearly, a meaningful portion has stayed in the system. We’ve also seen that partly triggered by this event and partly the fact that you’ve come to a lower-inflation regime, there has been an increased flow of savings into financial assets. You see that flow in banking deposits continuing to grow and have seen an even stronger growth in flows that have moved into mutual funds and other asset classes. So I think gains to the financial assets side of savings and investments from retail manifest itself in bank deposits as well.