Let me start by asking about the book. You have seen advances grow by 11%. What is your goal for the year in terms of credit growth?
As for our unused working capital facilities, it is almost around Rs 2 lakh crore and almost similar number is there for our undisbursed term loans. On top of that, we also have the visibility of a pipeline of around Rs 60,000 crore proposals. So overall, there are around Rs 4.60 lakh crore of proposals. As I perceive this is a very healthy pipeline and given that our set up business book is somewhere around Rs 8.10 lakh crore, if that number grows it will be reflected in a book of very healthy business for the bank.
Stick to the business book then. How much is your sanctioned business credit portfolio?
There is enough demand in the economy and secondly, the growth is also coming from the investment demand that exists in the infrastructure projects led by the Indian government. Ultimately, this is going to be the major lever that will bring more and more spending for investment purposes into the economy.
On top of that, the kind of guidance that’s there for PLI will be a major boost to manufacturing. The way our exports are increasing is a very healthy trend. Overall, there are many growth levers in the economy, which gives me confidence and belief that we should see decent growth in the future.
One of the levers you were looking to improve for the bank was the return on equity (ROE) which was 13.92%. You have set yourself a goal of 15%. When do you think that will be achieved?
I think we have given indications for 2024, but I think that by 2023 we should be close to it.
This is certainly good news. Let’s talk about the implications of the latest RBI decision, the CRR hike. Do you anticipate the bank will need to raise more capital given the expected growth outside of the $2 billion already announced?
: I don’t think so because these are two unrelated topics. First, CRR is something related to liquidity. We already have excess cash. Thus, a part will be pre-empted and the other part of the capital essentially has a growth objective. Right now the kind of capital adequacy ratio that we have can easily support some sort of 10-11% growth, but we will be watching the scenario very closely in terms of growth and making sure that capital is not a constraint when it comes to the growth of the bank.
One of the worries in a rising interest rate situation is slippages, as the pressure of higher interest cost kicks in. What are the expectations for this quarter and the rest of the exercise with interest rates expected to rise further?
The slippages are expected to be down but yes, of course, this is something that will have to be watched very closely as we are currently doing.
Let me ask you about asset quality. We have seen that the NPAs have now fallen to 4%. What is the outlook for asset quality and recovery expectations?
Asset quality we would like to see at least the same level if not improved.
How do you see the interest rate scenario evolving? We are talking about this at a time when the CPI has reached a high level. In fact, since May 2014, it’s the highest number. What impact will this have on the bank? Do you expect NIMs to improve further in this high interest rate scenario?
As for the inflation numbers, it is a function of multiple variables and a major component is fuel induced inflation as well as edible oil induced inflation, both of which are basically due to the imports we have. Going forward, the behavior of these two very important factors will likely shape the path of inflation. If you’re really asking me, rising interest rates are a derivative of inflation. Thus, if inflation is contained, the interest rate scenario may be much more stable.
What are the prospects for NIMs? We’re talking about a situation where we could see interest rates rise quite significantly over the next year.
Normally, there is always a lag between increasing deposit rates and this leads to a situation where interest rates on loans might start to move faster relative to deposits. This will have a positive impact on the NIMs of the bank.