How have you managed to maintain your net interest margins (NIM) despite a stiff competition. What is the outlook for NIMs in the current fiscal
Our NIM had already bottomed out in the third quarter of last fiscal. The rebound to 2.45% in Q4 from 2.09% in Q3 is positive for us. The main reasons for expansion of the NIM are the lower incremental cost of borrowing, re-pricing of a segment of individual loans and the pullback in non-performing loans. We expect NIMs to be in the range of 2.4% to 2.5% in FY14 as cost of funds is expected to come down due to softening of interest rates and our ability to raise money through bonds in the range of 8.6% to 8.7%. Focus during the current year will be on pushing high yield products like developer loans, lease discounting and loans against property.
Which segments do you see loan demand coming from How do you plan to grow further
Demand from retail segment is more from southern cities like Bangalore, Chennai and Hyderabad. We have seen good disbursements in eastern and central India last year and expect the momentum to sustain in the current year as well. We expect to grow over 20% in the current fiscal. Tier II and Tier III cities are seeing rapid developmental activities and demand is getting strong in these places. Our strategy is to reach out to the end users through our various distribution channels or directly. We plan to add eight new offices. We also plan to aggressively target the Tier II, Tier III cities and select rural centres as they present good opportunities for growth.
How do you plan to garner further market share, when banks are offering home loans at below 10%
Our market share has increased from 7% in FY10 to 10% in FY13. We never compete on price alone. The key is consistent deliveries till the last mile in the lender-borrower relationship chain. Ultimately, for a business like ours, it is not only about growth or increasing the market share. The growth has to be sustainable and profitable at the same time.
While most banks are grappling with bad loans, you have shown an improvement in asset quality. Did you take any special steps for recovery What about the corporate borrowers
The task is an onerous one, but our dedicated recovery and credit monitoring teams at all locations take care of this important aspect. It all depends on credit selection and to a great extent, our expertise in this area speaks for itself. Some stress continues in the builders portfolio, but we are confident we will recover our money through the underlying securities against these loans.
Are there new business areas you are looking at
We propose to float a new entity to enter into home loans in the north eastern states as the existing laws there do not permit for creation of mortgage. It will be in the nature of special purpose vehicle (SPV) for acquiring and financing specific assets in north east. On a pilot basis, we want to explore the rural market by opening a few branches in select centres.
The LIC chairman had said that the group would be keen on applying for a banking licence. Have you finalised your application what is the development on that front
Yes, we are keen on getting a banking licence. A committee formed for this purpose is working on the modalities.