Kotak Mahindra Bank celebrated 30  years of operations by announcing a bonus issue for its existing as well as new shareholders transferred from ING Vysya Bank on Tuesday. In an interaction with the media, executive vice-chairman & managing director Uday Kotak discussed the lender’s plans to integrate operations of the two entities. Excerpts:

How was the performance of the corporate loan book?

Corporate advances have grown faster than retail. Within corporate advances, it is more of working capital and transaction banking oriented business that has grown faster.  We still haven’t seen any demand for project finance coming in FY15. We have seen a pretty robust growth on the retail side, more so in the loans to small business category, as also a decent growth in LAP and home loans.

Did any segment witness muted growth?

An area where we saw a slowdown — and have also slowed down consciously — is tractor finance because the overall demand for tractors has fallen in the current year.

We are also seeing a marginally negative growth in commercial vehicles and construction equipment. We think, in the future, heavy commercial vehicles should do better; light commercial vehicles are still facing challenges.

We took a decision about three years ago that we are not comfortable with the credit cycle in commercial vehicle and construction equipment segments. The decision to slow down in the latter has paid us well in the sense that we have kept our asset quality in good shape. From here, we expect things to improve.

How has the SME segment performed?

We are seeing decent growth in the SME segment. We are quite optimistic about small and medium entrepreneurial businesses in India.

What’s your outlook on asset quality and margins?

On ING Vysya Bank, we will give you a full picture in the first quarter. We had done a detailed due diligence before announcing the merger. We believe that the portfolio is broadly in line with what we have experienced in our due diligence process and, therefore at this stage, we do not seem to see anything materially different.

Based on the books on March 31, this year we had total credit costs of around 40 bps, which include provisions for NPA and standard provisions, as also unhedged forex exposure. Independent of the merger, we believe we would have been able to guide for a credit cost number of around 30-40 bps in the next year.

Do you feel a pressure to reduce your deposit rates?

We don’t have any plans to reduce our savings deposit rates in the foreseeable future.

Can you give the NIM outlook for FY16?

Based on basic arithmetic on our and ING Vysya Bank numbers, at this stage, you will get a number between 4% and 4.5% for FY16.

Are any changes in management on the cards now that the merger is completed?

Treasuries of both banks were fully integrated on day zero, which is April 1, and very shortly we will first complete the integration of the wholesale bank and, then, move to retail integration.

Pending that process, we have a pretty strong integration management office, which is responsible for all support and control functions of the erstwhile ING Vysya Bank and we have created a concept of a bank in a bank through this process.

With the passage of FDI in insurance, are there any talks with the foreign promoter to increase stake in your insurance business or do you plan to sell any equity?

In our case, our partner Old Mutual, has the right to go up  to 49%,subject to fair-market value with a floor. While we have been in discussions, no financial decision has been taken yet. At this stage, there is no plans to sell any equity in insurance, but if our partners would like to increase their rights under the agreement, we will honour contracts.

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