IndusInd Bank witnessed a healthy growth in its top l ine as well as in operating profits for the June quarter. Romesh Sobti, MD & CEO, told reporters that the quality of the loan book is stable because of the tightening of lending norms.
How large were the slippages and recoveries in the June quarter?
Slippages were down in the June quarter to 1.5% because we made huge provisions for IL&FS. Only one large write-off happened in the March quarter and there was no big write-off in this quarter. Recoveries are good from the asset re-construction business and other business portfolios. The net slippages are 0.5%, so 1% is the recovery.
In March, you said you were hoping to recover some amount from IL&FS. What is the progress on that?
Although the bank had made provisions in March, we said there is a plan to sell assets that IL&FS would pursue and a number of assets were put on sale. We understand that in July or August, bids are going to open and buyers should be established. However, this may take a few months but recoveries are certainly going to happen, initially from SPVs. We have a very large operating asset which probably would be the one of the firsts to be sold and sale proceeds would be sufficient to, by and large, cover the debt. The outcome of the bids would be known in a couple of months.
How much exposure do you have to Dewan Housing Finance (DHFL)?
We do not mention company-specific exposures. We have exposure to a media group and a housing finance company. For our bank, that exposure was 1.9% of the total loan book and has fallen to 1.6% in June quarter because re-payments came in. We do not have any overdue and all accounts are standard. The consolidated security cover of 147% for exposures held include marketable securities in the form listed shares which covers 61% of the total exposure.
Have you made any provisions for these assets?
We have made provisions wherever mark-to-market happens – mark to market happens on the the bond portfolios – we have made all the mark-to-market provisions as per the regulatory guidelines.
Do you see any of these accounts turning sub standard?
These accounts have not slipped. Resolutions are going on. Moreover, re-payments are happening. If there is any loss, it comes under our business as usual which is 60 to 70 basis points.
Are you still lending to NBFCs and HFCs or buying their portfolios?
We have not downed shutters for any sector. We are just getting more sensitive to know who is strong and strong ones are getting finance from the banks and we are participating. I think our loan growth is pretty handsome, we do not have to buy any portfolios.
Credit growth is tapering off. Do you also expect your loan growth to come down in the quarters ahead?
I believe it has just come off its highs as it still is 12%, it is ahead of deposit growth which is 10%. As far as our loan book is concerned we are very diversified. We have a solid vehicle finance book, despite all the slowdown in the industry it is still 24%. The microfinance book is growing pretty handsomely, non-vehicle retail is growing at about 20%, the corporate book is growing 15-20%. We are confident that we would be able to sustain our growth in FY20.
Where is growth coming from in the vehicle loan when there is slowdown in the industry?
We don’t think in the banking industry there is a comparable model like ours, as we have a dedicated vehicle finance division. In the June quarter, CVs grew 20% , utility vehicle 27%, cars 21%, three-wheelers 19%, two-wheelers 24%, construction equipment 31% and tractors 32%.
How much have loans to Bharat Financial from other banks added to the IndusInd bank’s loan growth?
There in no other bank lending to Bharat Financial now, it was a mandatory requirement for the merger. Yes, it reflects in the loan book of the bank, this has added 2% to the bank’s book growth which is 28%. Actually, the bank’s loan growth was 26%.
How much exposure do you have to corporate bonds?
The treasury income for the June quarter has been Rs 240 crore. Our corporate bond book is almost negligible, most of the exposure is in G-Sec.