Business
Jayakumar says there is no evidence or data to suggest that there is a downturn in the businesses of NBFCs that are into housing loans or retail sector
Updated : Oct 01, 2018, 05:15 AM IST
The IL&FS debt problem seems to be rising out of the infrastructure financing side and has nothing to do with the financials of other non-banking financial companies, a top banker said.
“There is no evidence or data to suggest that there is deterioration in the portfolio of NBFCs that are into housing loans or the retail sector. Even those focusing on lending to micro and small medium enterprises have no liquidity issues,” P S Jayakumar, chief executive officer and managing director of Bank of Baroda told DNA.
BoB, which is in the midst of amalgamation with two smaller banks – Mumbai-based Dena Bank and Bengaluru-based Vijaya Bank – is seeing a revival of credit growth and strong recovery cycle. “Credit growth is getting stronger for banks and the operating environment is improving. IL&FS is a one-off case which is being tackled by the government and its shareholders, but for the broader market there are no issues,” Jayakumar said.
But the cost of finance is going to rise and loans are going to get dearer as the demand for credit goes up with the recovery in the economic growths, he said. “In general, there is an upward bias in interest rates. Customers have to brace for a higher interest rate regime. Home loans are variable priced in India. So they have to accept the volatility in interest rates.”
However, rates tend to move in a 1 per cent to 1.25 per cent range during the life cycle of a loan. There are also periods in the life cycle of a loan when the interest rates are 6-6.5 per cent and there are periods when they are 8-8.25 per cent. So during the average duration of a loan, there is a certain averaging out which makes it comfortable for the customer, he said.
BoB’s Board on Saturday approved the amalgamation and he said the merger poses challenges in human resources, technology and accounting integration.
But the bank has kept an ambitious target of six months to complete the merger. “On April 1, 2019, we want to be merged entity. For accounting purposes this is an ideal start,” said, Jayakumar. For the PSU banks the resolutions for the amalgamation scheme has to be tabled in both houses of the parliament. “The best session to catch would be the winter session,” Jayakumar said.
The merged entity will be the third-largest bank in the country after State Bank of India and HDFC Bank. Post the merger the number of public sector banks will come down to 19.