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Q&A: Chanda Kochhar, MD & CEO, ICICI Bank

'No negative shock on asset quality in coming quarters'

Chanda Kochhar
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Chanda Kochhar, managing director and chief executive officer, ICICI Bank, in a post-earnings conference, said the bank aimed to maintain its margin at 2.6 per cent. Edited excerpts:

What led to the significant decline in the bank’s provisions? How do you see the asset quality in the future?
The provisioning came down, mainly on account of the fact that we have completed the provisioning requirement on our unsecured retail advances. This portfolio is now very small, and does not require a high level of provisioning. For the other portfolio — secured retail loans and corporate advances — the asset quality remains stable. These are the main reasons why we saw a sharp decline in our provisions during the quarter. From here, it would be unreasonable to expect a further decline in provisions. Clearly, I don't see any negative shock on the quality of our assets in the coming quarters.

The bank’s restructured loans rose during the quarter. Is this a concern? Are you worried about the bank's current loan exposure to the power sector?
Some microfinance companies have restructured their loans, which led to an increase in our restructured advances during the quarter. One cannot predict whether there would be any case of restructuring in the coming quarters. However, broadly, the quality of our assets appears stable. The power sector accounts for about seven per cent of our loans. It is not correct to paint the entire power sector with one brush. About 50 per cent of our power sector loans are in assets that are operating and hence, the implementation risks on these loans are behind us. We are monitoring some of the cases, but don't expect huge negative shocks in this space.

What is your outlook on the net interest margin? Do you plan to raise interest rates on your loans and savings deposits?
We expect to keep our net interest margin at the current level of 2.6 per cent. A rise in lending rates would depend on our cost of funds. It won't be guided by monetary policy actions alone. We would have to watch the market and see how the deposit rates move. The savings deposit product is primarily used for transactional purposes. The best return, in terms of interest rates, is available from fixed deposit products. The final value derived from savings deposit products is a function of both the interest rate and transactional charges. So, to keep their savings deposits, customers would look at a number of areas like the interest rate, the transaction cost and the availability of branches and automated teller machines. Our savings deposit rate would be decided by the market situation.

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