‘Home loans will be expensive’

With the interest rate building up, there will come a time home loan it will be expensive for borrowers, he said Kotak Mahindra Bank managing director Dipak Gupta. While the demand for housing does not seem to decrease in the near future, financing a purchase will become increasingly expensive, he told Ajay Ramanathan. Information.

Small business loans are up in the December quarter. How do you approach this area?

For us, it will be limited and careful. There is space there and it is a small place for us; the total base for us is around Rs 5,000 crore. It will happen, it’s a beautiful place. But in general, it will be small. We do microfinance through our subsidiary BSS Microfinance, our business correspondent. They do the sourcing and we do all our sourcing through them. We are mostly in Karnataka, south Maharashtra, some parts of Gujarat and Uttar Pradesh. We are in these areas and we don’t intend to go much outside of these areas.

What is your focus on growth in the retail industry?

Selling for us is all about home loans on the guaranteed side. On the unsecured side, there are usually personal loans, microfinance, and credit cards. We hope that both groups will grow well. The home loan, and the loan against property as well as the unsecured side. The sales side is growing at over 20%. This is a good growth rate right now.

How do you view home loans?

I think the demand on the lending side is quite strong. What we need to watch is the interest rate. The interest rates have risen significantly and at some point, the home loan itself will be expensive for buyers. That’s what we have to watch out for. Maybe we haven’t reached that point yet. There is a huge demand. People in the low income level are very eager and eager to get a house, and therefore a home loan. I don’t see the demand coming any time soon. Money will become more expensive.

When will the bankers be disappointed with home loans?

It is a difficult question to answer. Let’s say for example that the total interest rate goes up by another 100 basis points. Today, a good AAA buyer usually gets a home loan at 860-865 basis. The next 100 base units will be 960-965 units. At that time, you take a 15-20 year loan at 965 basis, which is an expensive statement. It will begin to affect demand at that time.

Do you have an estimate of the non-performing asset ratio?

Now, we want to store the non-performing asset (NPA) rates as low as possible. You should see the net NPA in two parts. One is a static file; even if it’s about 1% safe side, it’s good. On the passive side, your total non-performing assets should be close because ultimately, recovery is very low. On the safe side, recovery is still reasonable, so you can do it with 1% net NPA. But on the non-secure side, it should be around 0.25%. If you take the two out, an NPA of around 0.5-0.75% is good. That will give you a distribution ratio of something like 75-80%, which is good.

How do you see the loan-savings story going forward?

Loan-to-deposit is less of a concern. What you should keep an eye on is the credit-to-deposit ratio. A debt to deposit ratio between 85-90% is reasonable. It also depends on your budget. All of us are in capital close to 20%. Our equity ratio 1 (CET1) is almost 20%. It also provides extra comfort. So with a 20% CET1 rate, a debt to equity ratio of 85-90% is good.

Will banks now be more comfortable raising money from the debt market because of higher deposit rates?

Generally, financing from the market occurs either in the form of a certificate of deposit, which is for a duration of one year, or occurs in the form of refinancing instruments. Let’s say the Small Development Bank of India or the National Bank for Agriculture and Rural Development, that kind of thing. This usually happens over a period of three to five years. Let’s say it happens against capital assets. That money is good because it provides stability. If that price is right, you should go in for it. Funding from the market in the form of large deposits is something you should be careful about. That’s a hot coin and rarely gets past one year. You should always be concerned about big savings. If interest rates go up, they will take it out. It’s a short movement. That’s why you have to be careful.

When do you see private spending picking up?

Whenever someone asks me this, I say about 18 months away. So it stays the same. I think it’s still a long way off. Usage levels are still low.

How do you view the events from a lending perspective?

We are often not in that category. From a credit standpoint, it’s not good. You can finance the company with its savings, you can. But pure unsecured financing for startups seems like a risky, credit-wise approach. Our initial funding is modest. Even if it is there, it will be against the deposit from the beginning.

Will we see lenders focus more on loan consolidation moving forward?

I think normally when you see it, it will not be approved for a while because at this time, the credit report is very good and it may not change for the next six months or more. I still expect the insecurity to be high. What happens is that most AAA customers will always borrow unsecured. You borrow from a Tata or a Reliance, usually unsecured. From a risk perspective, it is not a risk. These are big shows, remember. I think for a while, the insecure and permanent part. As long as the credit looks good, it will be more unsecured than secured. Right now, we’re talking about a catastrophic event.

The bank has a saying that ‘bad lending is usually done in good times but good lending in bad times’. How relevant is this today?

This is a very early stage. In the beginning, everyone is hungry for new assets. I think it looks good for the next two to three quarters at least. It will start to happen when the growth is high and the demand will also be high. When the investment cycle begins for example, bankers need growth and limited assets. That’s when all these bad things happen.

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