Aditya Puri, managing director, HDFC Bank, is betting on liquidity infusion and good monsoon to boost growth and revive economic and market sentiment. In an interview to CNBC-TV18, he maintained that there is enough demand in India and the Indian financial market is expected to be the best in the world in the next five years. Here are the top 10 takeaways:
On External Benchmarks Floating rate deposits are not feasible. There is a lot of pressure on banks to transmit lower rates, but must look at debt market reforms as well.
What the RBI has said is, they have not told you how you fix your rate. So there is an interest rate risk, you add that interest rate risk. I also saw in the newspaper – without mentioning the bank that they have also been offering this only to the higher level of customer, the lower level of customers and rightfully so are taking a cash margin to take care of the fact that when interest rates go up, then they should not have to have their entire retail portfolio in NPA. Traditional wisdom says that when you are at the lowest point at an interest rate cycle, you fix, not float your loan. So, properly managed, will there be the tremendous margin compression that one envisages? I say no. There is a lot of pressure on transmission, but I think we should have a debt market. We have talked about it for a long time but there are fundamentals that have to change to have that. You must develop a bond currency and derivative.
On Lending Rate Cuts Lending rate trajectory is down but rates won't fall overnight.
It cannot be overnight.
On Risks In NBFC Sector There is no systemic risk in NBFC sector. Good NBFCs are getting money.
Is the non-banking financial companies (NBFCs) issue a crisis? The answer is no. Is it a problem? Answer is yes. Will it create a systemic risk? Answer is no, because if you do not participate in the clearing, it is a bilateral between you, the owner and the investor. So there is no systemic risk. Is there a liquidity issue for NBFC? No, because the creditworthy NBFCs are getting money. If we have a solvency issue as the governor said, that is separate. So will there be some hits here and there? Yes. Is it enough to create a systemic crisis? No. Is it enough to move the needle in terms of lending reduction from NBFCs? 4-5 percent of the NBFCs account for 90 percent of the lending. Will there be some impact? Yes. For a large country like India,
bade bade desh me chhoti baat hoti hai. On Problem In Real Estate Sector Real estate problem confined to luxury segment, at a right price buyers will come.
Let me put the real estate and construction in perspective. Is all real estate and construction in a problem? The answer you would agree is no. Commercial? Not. Middle, slightly above middle and affordable? Demand is not an issue. So let us boil the thing down to those luxury flats. So
jisne kharida, jisne paisa diya, jo company ka owner hai, wo maar khayega. Even if you see what the finance minister has done, the concession is for affordable housing. Is there an issue there? Yes. Is it earth-shaking? No. The prices will have to come down. Are those inventories completely useless? No, at a price they will go. That price has to be determined. On Altico Capital Controversy Cannot pool assets where there is securitisation
I feel strongly on the following. There should be no pooling of assets which are specifically hypothecated to a bank, that is the basis on which we lent. Even in consortium lending, you have security and the consortium members are required to intimate the lead bank, which is done if there is any issue and that should be raised at that point of time and not when there is difficulty. I am here only to protect the interest of my depositors as well as offer fair and competitive pricing and people who do not behave in a proper way, I am here to kick them.
On Growth Worries In a slowdown, with liquidity infusion & good monsoon, growth should return
Let me backtrack a bit. Yes, we were growing well then there has been a slowdown for a couple of quarters. Everybody has a view on whether it is cyclical or structural. Suffice to say there is a slowdown which needs to be worked upon.
I would then like to split this into two, medium-term and the short-term. Medium-term the demand that will be created - JPMorgan also talked about it - through urbanisation, through the number of rich households as well as semi-urban and rural India where people will start mimicking the consumption pattern, we think it augurs well. We also believe that a lot of the reasons, without going into them in detail, now have changed. So there is more money being pushed in. God has been kind, we have had a good monsoon.
Festive Season Diwali/festive season will be very good
Diwali is going to be very good. I can tell you now – look for this space. Starting September 27 to the end of December are going to come up with the biggest Diwali Dhamaka with our partner that this country has ever seen. What we have discussed with all our partners is that you cannot keep raising prices and the price points that will be available -- and we are giving over and above whatever discount they may give, we are giving 7-10 percent cashback.
CEO Search Will appoint an internal CEO search committee in Jan-2020
The process has started internally, we will appoint a search committee in January. There are two things we could do for this. Firstly, my one-down has been running their businesses and all investors have met them for the last one and half years. Two, the strategy in terms of what we will do for technology, for customers, retail, wholesale, the platforms, the peoples training is a not bird in the air, it is all there to be executed. Thereafter, we will look and unless you are presuming that God was totally unfair and there are no bright people in the world, we will not hire a Dodo.
HDFC Bank After Puri Retires Confident about strong momentum in quarterly results ahead
Just the watch the result every quarter from now, see the momentum and talk to me in February. If you are not convinced then you have not applied your mind. Insider or outsider? It is not left to me but it should be the best man.
On Stress In HDFC Bank's Portfolio
I see no reason unless there is a major event risk to be worried either about growth or about credit quality or about margin and I see over the next five years my cost to revenue going down by 5 percent.
No reason to be worried about growth, credit quality or NIMs