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RBI policy in line with expectations; downside risks have receded: Keki Mistry, HDFC

"The downside risk has perhaps receded a little when compared to what it was in the last policy; and I read that as mildly positive."

ET Now|
Updated: Sep 30, 2014, 03.16 PM IST
"The downside risk has perhaps receded a little when compared to what it was in the last policy; and I read that as mildly positive."
"The downside risk has perhaps receded a little when compared to what it was in the last policy; and I read that as mildly positive."

In an interview with ET Now, Keki Mistry, VC & CEO, HDFC, shares his views on the RBI credit policy and his business outlook. Excerpts:

ET Now: What is your initial reaction to the RBI's statement?

Keki Mistry: It is pretty much in line with what was expected. There has been no cut in rates, CRR or SLR. It is, I would say, only slightly positive, depending on how the market reads the statement about the downside risk of the January 2016 inflation target of 6%. The downside risk has perhaps receded a little when compared to what it was in the last policy; and I read that as mildly positive.

ET Now: The RBI did mention though, that there are significant upside risks to that 2016 target and it will be a data contingent policy going ahead.

Keki Mistry: That is obvious, because if we are talking of something which would happen one-and-a-half years later, there have to be upside risks that are dependent on a whole host of facts, like how oil prices pan out over the next 18 months and what the rainfall scenario over the next 18 months would be.

However, having said that, whatever needed to be done by the RBI has been done. As a result of that, and as a result of how things are looking today, while the risk continues to remain, it is lesser today than what it was during the last policy.

ET Now: Do you see any kind of disinterest as far as housing loans are concerned, or is housing one sector which never gets affected, as far as retail borrowers are concerned?

Keki Mistry: If you look at our business, we have two elements. One is the individual side and the other is the non-individual side. The bulk of our lending, or incrementally as much as 85-90% of our lending, is to individuals and a relatively smaller proportion in recent years has been to non-individuals.

Now notwithstanding the slowdown in the economy and the GDP numbers coming down, demand from the retail side of the business, which constitutes individuals taking loans to buy a house for their own use or constructing a house for their own use, has not come down. On the corporate side, there has indeed been a big slowdown.


The corporate segment which used to grow at a much faster pace till, let us say 2010, has seen a slowdown over the last three years or so. There have been some signs of pickup in the sense that when we talk to people in the industry, there are people who are talking of investing; sentiments have obviously got a lot better, people are looking at their business plans and seeing what needs to be done, but it has not yet translated into hard cash being put out.

Hence, the retail side continues to remain in line with expectations. That is largely because of the fact that in a country like ours, the demand for housing structurally is always going to remain strong because of shortage, low penetration and demographics.

ET Now: Owing to high inflation, banks have seen real interest rates coming down and they have been hit because deposit growth did slow down. Did HDFC also find the same kind of problem in sourcing funds?

Keki Mistry: Not really. To my sense, there was no change in getting money from depositors. If you look at the incremental growth in deposits in the first quarter, that is April to June, it was very healthy.

However, when we look at the last 12 months, more in terms of the macro scenario, rather than one specific to HDFC, it was impacted by the fact that inflation in the past six to nine months was a lot higher.

As inflation was higher, people’s saving capacity was reduced and lesser amounts were saved. If you have been saving lesser amounts, obviously the growth of deposits would be lower.

Furthermore, even within that lesser amount that was being saved, people were more comfortable investing in real assets, like gold. That clearly has slowed down over the last six months and with lower inflation, my sense is that it will translate into higher growth in deposits in the coming period.

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