'The gloom and doom scenario is overdone in India'

Q&A: Aditya Puri, MD, HDFC Bank

HDFC Bank Managing Director Aditya Puri tells Niladri Bhattacharya that he expects the banking industry growth to moderate as the economy is showing signs of slowing down. However, the health of the banking industry remains sound.

What is your expectation from the coming monetary policy review?
I do not expect any significant measures in terms of rate cuts in this policy, given the fact that there is enough liquidity in the system, inflation coming down, and commodity prices moving downwards.

More importantly, the fuel prices have come down. However, going forward, if this trend continues which is likely to be the case, interest rate is likely to come down in the long term.

How do you see the credit growth in the coming quarters?
The banking industry has grown by over 25 per cent in recent times and there is no reason why this trend should not continue. However, with the economy slowing down, the growth is likely to be moderate in the coming quarters.

The doom and gloom scenario is overdone in India. The GDP growth projections are 5 per cent for this year and 5.5-7 per cent next year, which are very good in the current context. So we are doing relatively well.

The growth in the banking sector would moderate as economy will grow at a slower pace, but it is common scenario in a bearish economic cycle. However we are better off compared to the others which are even degrowing. The health of the Indian banking industry is sound.

But there is a perception that banks are not lending to some sectors, specially real estate.
Well, there might be some isolated cases. But by and large, we are lending across the sectors. Yes, there are some issues in the real estate sector.

Certain NBFCs too are complaining that banks are not extending credit to them…
As far as we are concerned, we are lending to our existing customers, but there might be some cases where some of them have missed out due to higher risk perception.

Bankers are talking about higher non-performing assets (NPA) in the coming quarters. Even for HDFC Bank, the NPA increased for the last two quarters. Is this mainly because of the asset quality of Centurion Bank of Punjab (CBoP)?
Whenever a merger happens, the NPA rises for some time.In our case, it’s marginal this quarter and as we have said earlier, it is expected to continue for the coming quarters. 

But as a whole the banking industry would witness higher delinquencies, but there is nothng to worry so as long as it is at controllable levels.