Despite a 38% year-on-year jump in deposits, higher than 25% growth in advances, IndusInd Bank saw a 34.5% rise in its net interest income, which, in turn, drove a 29% bottom line growth for the December quarter. In a post-earnings interaction, the bank’s executives, led by managing director and CEO Romesh Sobti, told reporters that savings accounts had helped maintain margins and repayments had risen after November 8. Edited excerpts:
Reasons behind the bank seeing 25% loan growth even as system-wide credit growth hit multi-year lows.
We have four segments in the corporate part – the business banking segment, the mid-market and the large segment, financial institutions and the public sector segment. We have about 10 products in the non-vehicle segment. Then we’ve got half a dozen products in the vehicle retail. So you see how it is spread out. So, you don’t need to have lumpy growth in any one part to see a growth like this. It is so granular, so inorganic that if you grow by Rs 500 crore in each one, you have a high cumulative [figure]. We are a small component of the banking system. We are less than 1%. So if we’ve got 25%, it doesn’t move the needle for the system, but it certainly moves the needle for us.
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Your view on delinquencies and slippages falling.
Credit costs have been the same. In fact, there has been a beneficial impact of demonetisation. Our delinquencies and slippages actually improved over the quarter because repayments came in faster before December 30. We were surprised to actually see delinquent clients also paying up, written-off clients also paying up. Actually, in the retail part, we’ve suddenly seen an improvement in slippages. The other part was microfinance, where also in the first few weeks we saw a slowdown in collections, but then it zoomed. Within four weeks of demonetisation, collection rates were up in the 90s. They are back to 98-99%.
On net interest margin (NIM) being steady and net interest income (NII) rising despite a fall in the credit-deposit ratio.
What was the cost of additional deposits (garnered since demonetisation)? That you’ve to see. If you had fixed deposits growing by 56%, you would have seen a shrinkage. But the SA (savings accounts) has grown by 56% and SA is at 4% (deposit rate) and if you have CA (current accounts) and SA, the blended cost is well below 4%. So you are replacing existing high-cost deposits by these deposits. Your yield is not falling to the same extent because 70% of your book is still fixed-rate. We should actually have seen an expansion in NIM. We are saying that if we didn’t have the impact of the CRR, our NII should have been higher by Rs 30-40 crore.
Your take on rise in use of digital payment channels.
Earlier, we used to acquire about 75,000-80,000 (credit and debit card) customers every month and in December we acquired 1,33,000. That’s a huge jump. Then the activation rates have moved up dramatically. Debit card spends have moved by almost four times. Transactions on our credit cards have increased 3.5 times.
The ticket size may have gone down on credit cards, but the volume which is coming in, is very, very high. Our ticket size was about Rs 8,000. Now, the credit card ticket size has gone down to about Rs 3,500.