Asset quality at Axis Bank was stable in the three months to March, although there was a slight increase in NPAs y-o-y. Sanjeev K Gupta, executive director (corporate centre) & chief financial officer, and V Srinivasan, executive director (corporate banking), say accretion to stressed assets in FY16 is likely to be lower than last year.
Could you tell us why NIMs have come down?
We cut our base rate by 10 bps in October, the impact of which was visible only in Q4. We have already cut base rates and, over time, deposit rates would also come down. In medium term, the NIMs would be well above 3.5%.
What’s the reason for the increase in provisions considering that asset quality has remained stable?
As per RBI mandate, we made a provision of about Rs133 crore for unhedged foreign currency exposure for the fiscal ended March 2015. In terms of pipeline, we have about 2-3 transactions that could get restructured. The value for this would be near Rs500 crore.
What is your outlook on asset quality? Do you expect any stress in the infrastructure portfolio?
We expect the economic activity as well as credit growth to be back-ended. Looking at the next few quarters, we believe that the accretions to stressed assets in FY16 is likely to be lower than last year. The infrastructure sector has continued to be fairly challenging. I think those challenges, with the steps taken by the government, will become less going into FY16. We will have to monitor the portfolio very carefully.
What are your expectations on credit growth?
For the full year, we expect a growth of 18-20%, which will be backed by the retail loan growth, expected to be around 25%. The corporate loan book growth is expected to be lower than the retail side growth, at around 17-18%.