'Less space for Reserve Bank to intervene now'

The Reserve Bank of India has less space for policy intervention with regard to the present interest rate regime in the wake of tepid credit growth witnessed in the economy along with the overall liquidity scenario.

“After 3G auction, credit offtake is not picking up in the second quarter. Liquidity situation is better but still not in excess. So, we don’t see a lot of space for intervention at this point of time,” Shikha Sharma, managing director and CEO of Axis Bank, said in Bangalore on Thursday.

She, however, said the central bank was taking stock of the situation and would take appropriate action in this regard. On the outlook on interest rates, she said, “It’s a difficult environment to take a call on the issue.” In a bid to tame the rising inflation, RBI had raised both repo and reverse repo rate during its last credit policy review meeting.

However, as the advances from commercial bank shows tepid growth along with large government borrowing crowding out liquidity from the system, the bankers expect the RBI to leave interest rates untouched in the near future.

Referring to the spinning off of its private equity arm, Ms Sharma said the bank was in discussions with various investors to sell its private equity arm. “We may sell it to the present team and that is one option we are looking at. However, we can’t give a time frame for this,” Ms Sharma said.

Axis Bank will also keep increasing branches by adding 25 per cent branches to the present branch network every year in bid to increase its overall branch network in the country. “We will remain an India-focused bank and will add 25 per cent branches to our present branch strength every year,” Ms Sharma said.

On the outlook on the net interest margin (NIM), she said NIM would hover around 3.5 per cent by end of this fiscal. “When we attained an NIM of 4.1 per cent last fiscal, we gave a fair indication to the market that this is not sustainable. With the growth in business, NIM will hover around 3.5 per cent,” she added.

Axis Bank has over 1,070 branches across the country with a customer base of over 10 million as of now. The bank posted a net profit of Rs 742 crore, up 32 per cent during the April-June period this fiscal. Net interest income of the bank rose 45 per cent to Rs 1,514 crore during this period.