What is your view on the overall interest rate scenario?
The general expectation is that interest rates would soften but before reducing rates for advances, one would need to look at deposit rates. So it is not so easy. Though inflation is coming down, the consumer price index (CPI) is still very high. What has come down is the wholesale price index and this has to be kept in mind before bringing down deposit rates drastically. We must realize that deposit rates have to be attractive enough to draw people to park their funds in banks. Banks need a healthy deposit base to be able to drive credit growth.
Though most banks have brought down rates for housing loans, the pick up has been slow. Why?
Demands for housing loans have not picked up because of the prices. The prices for houses are still high and unaffordable. People are waiting for the prices to fall further. Until the prices come down to a reasonable level, the demand will continue to be subdued. With these prices, the middle class is still postponing the decision for purchase of assets. Once prices soften, demand will pick up. This would also then boost sectors like steel, cement and construction.
Which sectors would drive credit growth in the coming months?
Infrastructure, pharmaceutical and food processing are likely to drive credit growth.
When do you think the economy would start showing signs of revival?
I would say June. From June onwards, we may see a reversal of the downward trends. Rural economy would be very critical this year. A good monsoon would ensure that rural incomes remain at a satisfactory level.
There were apprehensions that non performing asset level would inch upwards in the last quarter of the current fiscal. What is your view on this? Are banks becoming more conservative in lending?
NPA level have not gone up to any alarming level. I do not foresee any major increase in NPA in the coming months as well. Banks, which have lend prudently need not worry. Going ahead, banks would focus on qualitative credit growth. The risk parameters would get more defined.