Kotak Mahindra Bank is currently evaluating whether to accept green deposits, says group president and consumer banking head Virat Diwanji. He tells Ajay Ramanathan that while the Reserve Bank of India (RBI) has established a framework, the timing of these deposits and the simultaneous availability of green projects is a challenge. Excerpts:
A significant chunk of the Rs 2,000 notes have returned to the banking system. How has this impacted banking liquidity?
A bulk of the notes have come in through the business accounts wherein people have used their Rs 2000 note for cash on delivery during online purchases and these have been accepted. Obviously, a business person is not going to leave that money unutilised. Yes, there is temporary spurt in deposits but it will be used in the near future. Yes, the money has come back into the banks. It will result in some kind of a spurt in the balance. But it is a short-term phenomenon. Very soon, that money will get used up.
Do you expect banks to hike the fixed deposit rate further from current levels in order to meet the demand for credit?
At this stage, the repo rate hike has been paused and inflation is getting under control. It is unlikely that the deposit rates will rise. The borrowing rates in the wholesale markets have come down. If you look at the overnight rates and the G-Sec, the rates have come down. From that perspective, I do not think that there will be an increase in the deposit rates in near future. Every bank will have an operating philosophy as to what they want to do. There are restrictions on how much certificates of deposit they can have. The usual consumer psyche is that if this is the peak interest rate, then let me go and lock-in my money at a higher interest rate. Today, you will find deposits of a longer tenure, getting slightly higher flow.
You have said previously that there will be some slackness in home loan demand. When will we see a revival?
There will be a slight slackness in the demand for home loans. It has to break the shackles of what happens to the regulatory rates. That has got a link to inflation. There are multiple parameters to inflation including rainfall. We will have to see all those things. But till Diwali, there will be slackness. There is no doubt about that.
What are your plans for the credit card portfolio?
We have a very clear cut strategy on optimising risk-adjusted returns. From that point of view, we believe co-branded cards has helped us bring in a good customer base from different segments. We have already done arrangements with PVR, IndianOil, Indigo; we have tied-up with Myntra recently. We have a clear-cut strategy on co-branded cards; we also want to focus more on existing customers. We will offer cards to customers using the data analytics model. We want to grow and we have been growing our card base. At the same time, we have one eye on the risk of the portfolio. If you are looking for an answer, then yes, we will continue to remain focused on credit card growth, which we has been demonstrated for the past 12-15 months.
We have a very different evaluation model for the new-to-credit segment but we are not going all out on lending to this segment. We are doing some experiments, we will measure the output from that and we will take a call. We have a customer base where we can see their unified payments interface data. If we can offer these customers a credit card on the basis of this data, then we will certainly do so. We also have a strategy of ‘low and grow’. I might start with a ‘low’ limit to you. As you start using it and I get the behavioural pattern, I might then gradually increase your limits. These are the experiments that we are doing currently. We will continue to do these.
RBI has recently allowed banks to accept green deposits. What has been the response and what are the challenges involved?
We have been on the discussion table for long. The basic challenge is that you might get money but there is not enough demand in that segment where you can say that this is a green project. There could be a mismatch between the deposits and the lending. At this stage, we are contemplating on the guidelines that have been issued. But the real challenge is the timing of the deposits and lending. There might be a green project which requires a substantial amount of funding where you may not have enough deposits and vice versa. There is a team which is evaluating that.