What factors contributed to the profit growth?
All the three companies, Bajaj Finance and the two insurance companies, have contributed. While Bajaj Finances profit grew 33 per cent to Rs 160 crore, the life and general insurance companies had profit growth of 59 per cent and 52 per cent, respectively.
At a time when banks are facing the challenge of muted loan growth, how was the growth for the lending business?
There are two reasons why Bajaj Finance grew fairly well. We have built a diversified lending model. We can press the accelerator on different lines of business, depending on the demand and credit quality we see in the market. The second reason is that we are still small in size, which allows us to grow without sacrificing the bottom line.
While the profit of Bajaj Finance has grown, so has the loan loss provision, which went up 42 per cent to Rs 51 crore during the quarter.
Our provision coverage ratio is at 80 per cent, almost the same on a year-on-year basis. We continue to provide more for loan loss than the regulatory requirement. The economy is going through challenging times and we are extra careful. Our total book size is Rs 18,000 crore.
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What kind of growth are you envisaging in the coming quarters?
In Bajaj Finance, we have seen deployments up by 12 per cent in the third quarter and we expect this to continue.
Can the spreads be maintained in the lending business?
The spreads overall are fairly healthy. We have 3.5 per cent return on assets (after tax). I would expect these levels to be sustained.
The central bank has come out with stringent norms for the non-bank finance sector, like raising the tier-I capital requirement and asset classification. Will these hurt profitability?
These will pose a challenge for smaller non-banking financial companies (NBFCs) but the Reserve Bank of India (RBI) is recognising that many of the larger NBFCs are bigger than the smaller banks. We welcome that, though we think RBI should give the benefits of banks to NBFCs as well. We will meet the same kind of regulatory and provision requirements.
There is an expectation of the final norms for new bank licences being issued by RBI soon. Do you think converting the NBFC into a bank will be a challenge?
There has been past cases where NBFCs were converted into banks very successfully. But that was long back. We will wait for the final guidelines on bank licences and see what requirements RBI puts down, than decide. I think the criteria will be different for different NBFCs.
The central bank will announce its third quarter review of monetary policy on January 29. What are your expectations?
I definitely expect interest rates to fall by 25 basis points, if not 50 bps.