Axis Bank has reported one of the highest growth rates in the past few years and posted a 38% increase in profits in 2009-10 at Rs 2,515 crore. In a conversation with Financial Express, Shikha Sharma MD & CEO Axis Bank says the bank over the long term will focus on the corporate and the SME space and within that will specialise in the infrastructure segment.
How do you read the liquidity and interest rate environment in the next few months?
Interest rates on gilts have been somewhat volatile but should remain range-bound because there?s a fair amount of liquidity in the system. Last quarter liquidity flowed out of the system on account of the payments for telecom licences but it will probably come back, so there isn?t likely to be too much upward movement in interest rates unless of course RBI takes some action. Interest rates ultimately will be determined by two factors, the liquidity situation and the central bank?s actions.
The growth in deposits has been moderating somewhat…
Yes, in the first quarter, deposits have grown slower than credit and so credit-deposit ratios have jumped for almost all banks. But we have to wait and watch because India is a savings-led economy so while there may be some aberrations here and there I believe they will pick up.
Do you see signs that more companies are going ahead with projects?
The signs are positive but if we look at capital investment, most of the investment is being made in infra structure and related areas. We haven?t seen broad market pick up in credit yet, but it?s happening slowly, it?s not as though eveyone?s investing, there is some caution. Companies are wary of being over-leveraged when there?s some uncertainty around global financial markets. Many of them are also re-looking business models, saying they will build only a certain amount of capacity and outsource the rest. Moreover, capacity utilisation for many SMEs hasn?t yet reached an optimal level.
Is retail borrowing picking up?
Individual borrowing has been good except that the hike in real estate has resulted in some postponement of purchases. The mortgage numbers were good in the last quarter, they are growing but there?s no pent-up demand. Auto loans are doing well. And banks are going slow on personal loans. The 20% loan growth target set by the RBI for 2010-11 could be exceeded while the deposit growth target should be achieved.