Where do you see interest rates now?
In general, for the system as a whole, liquidity will tighten. The general direction may be northward, but we have managed to do with sufficient liquidity so far. If there is a system-wide impact, we will have to see.
Are you saying that you will follow if your main rivals increase rates?
No. If there is a system-wide impact in terms of costs, then we will have to see. If the cost of deposits is higher, then we will see what needs to be done.
What will be the impact on retail credit?
We have been saying this from the start of the year that there will be some slowdown in demand. A northward movement (in interest rates) has now been seen for a year, so the growth rate will come down to 10-15 per cent, and not 30-35 per cent as in the past. We are not revising our (growth) target downwards.
Do you see the demand for corporate loans coming down?
The investment pipeline is very strong. So far, people have not withdrawn (from projects) and we have not seen any slowdown. So, as of now, we are not revising our targets.
Have the number of large projects seeking funds decreased in the last quarter?
In the last three months, we have not seen people coming up with fresh projects (for funding). But the Rs 700,000 crore investment that is in the pipeline is on course. We do not need fresh projects but we need to watch the projects that are already there.
Is there further deterioration in credit quality, something that you flagged earlier in the year?
The credit quality continues to remain similar. You see, 50 per cent of the portfolio is fixed rate loans comprising auto loans and other such loans where the rates do not go up. In case of mortgages on floating rates, which have been availed of by younger people, the tenor of the loans changes. So, it (rise in lending rates) does not impact. The impact is on the rate of growth of business.
Auto companies and consumer durables players are saying that more than interest rates, it is the availability of loans which is affecting their sales. Is it a fair complaint?
The complaint is not fair. You need to look at the context. New loans are affordable to fewer people. So, the rate of growth for new loans will be impacted. If interest rates are one-two per cent lower, many more people would buy cars. The EMI (equated monthly instalment) is bigger, so fewer people can afford it.
Should we first expect an increase in rates on sub-PLR loans?
The increase will be across the board.
