US subprime crisis may affect India in many ways: Parekh

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The ongoing US subprime crisis may not have a direct impact for the time being, but is likely to hit Indian markets in various other ways.

Speaking to reporters on the sidelines of the ‘Global Trade & Investment Conference: India Your Partner’ in Mumbai on Friday, Deepak Parekh, chairman, HDFC, said, “We have not been hit by the US subprime crisis as our loan books are good.”

HDFC’s non performing loan is below 1%, he said.

However, as the crisis widens in the US, the companies, including outsourcing units and IT enties that heavily depend on their overseas clients for getting their revenues, may get affected in days to come. The subprime crisis may lead to a slowdown and then to a recession in the US economy.

In case it happens, the chief technical officers (CTO) of US-based companies, having their back-office operations in India, will be compelled to lower their budget, which will further have a cascading impact on Indian companies, said Parekh.

The good part of the story is that unlike China, which had an export oriented economy, the Indian economy was based on the domestic market, he added.

On the interest rate, Parekh said that it must be softened by 25-50 basis points within three months from now, if the RBI doesn’t go for a further CRR hike, when it reviews its policy on January 29.

However, he maintained that HDFC would wait until the policy was announced by the RBI before going for the cut in lending rates.

“We would like to see the spread in lending rates at the same level where it was at the end of the second quarter,” he explained.