Kotak Mahindra's fourth-quarter results exceeded analysts' estimates by a wide margin and were studded with records in lending and margins and shrinking bad loans. After the results and the Reserve Bank of India’s (RBI’s) sudden off-cycle rate hike, Uday Kotak, managing director, told CNBC-TV18 the bank’s loan momentum would continue.
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“We are clearly in a never-normal world. Wolf of inflation was getting more entrenched, and there was clearly a need for RBI to move. Commend RBI for taking this action during market hours. Based on the last RBI policy, I had commented even at 0 percent real interest rates, we need 100 basis point hike in the current fiscal,” Kotak said.
The MD said he would not be surprised if repo rates went to 5.25 percent or higher between now and March 2023. “I believe inflation will be a little higher, and so I won't be surprised if rates were hiked further,” he said, adding we were still in the early stage of the upward rate cycle.
He said rate hikes do have an impact on credit demand, but rates have been at historic lows, and a 40 basis point hike would not make a dramatic difference to consumer demand. “There is always a tendency to always look at rate hikes from a borrower’s point of view. Savers will also benefit now with the rate hike,” Kotak said.
He said macro changes in discretionary spending, inflation, etc., would have a bigger impact on consumer demand.
“We are in a very comfortable position from the point of view of the financial sector in general. Our loan growth momentum will continue. The bulk of our book is floating rates, so the ability to transmit rates is high,” Kotak said.
He said the bank’s fourth-quarter shows the consumer finance book has grown 40 percent annualised. “We have a low cost of funds, a very robust balance sheet, and will be more aggressive on unsecured retail going forward. We are mining our existing retail customers’ portfolio deeper,” the MD said.
Kotak has said banks would reprice new fixed-rate loans. “MCLR based floating interest rates have already been moving up. We will see MCLR based loans getting repriced as rate hikes get passed on. With today's hike, external benchmark linked interest rates will also get repriced,” he said.
Kotak said the bank did not do anything big inorganically last year and would continue to be “very open” to inorganic opportunities.
On Life Insurance Corporation's initial public offering (IPO), Kotak said: “Agar kisi ko insurance policy lena hai, they don’t say insurance le lo, they say LIC le lo. That tells you about the strength of the brand.”