How was the quarter for you in terms of growth? You have been posting good growth in the last few quarters.
Govind Singh: This quarter has also been good. In terms of overall growth, you must have seen for the year, we have grown our advances by 31%, deposits by 27% and growth in Q4 is much better than for the year also. We had discussed that in Q1 and Q2, it was slow growth because we had done a lot of interventions and a lot of new initiatives had been taken and we are deploying those in the field. So that deployment is over now. We had some issues in the middle of the year in terms of a lot of holidays. So collections were a little lower in that case. I think all those have been taken care of and we have got a very strong team across all the verticals. So we will see this type of growth coming in future also. In all the key parameters, we have done well in Q4 and overall for the year.
What was pleasantly very surprising was your NPA numbers stood at 0.03%! Is it sustainable? How did you achieve that kind of number and what would you do to guide the Street because the expectations may go up. In what range would you aim to keep your NPAs?
Govind Singh: Our net NPA is at 0.03%, but our gross NPA is at 2.5%. The gross NPA number will certainly come down from here and it may be in the range of 2-2.10% if we look at FY25. Net NPA is 0.03% but actually we thought it will be almost zero and in fact it is very close to zero and that is what we are indicating. So, this will be zero for this year onwards because we are making healthy provisions and we are ensuring that our PCR is almost close to 95% plus, so these numbers are sustainable and in FY25 also, in terms of overall growth trajectory and credit cost which we had indicated will be around 2% or so. So, for FY25 also we expect to be in the range of 2%. And if you remember that we had discussed, we have a floating provision policy also. So, we had done 1.5% for the JLG portfolio last year and then the board has guided us. This is 2% for this year. So, almost Rs 75-80 crore additional provision we will take and those have been absorbed in our profits whatever we have shown. That is additional provision which will be a cushion in case of any exigencies as far as the market is concerned.You are saying that you will keep your gross NPA at closer to 2, 2.1%, but net NPA will go down because of elevated provisions and the floating provision which you have. Is there any accident which you are preparing for or would you just take preemptive measures to keep it elevated?
Govind Singh: It is a preemptive measure. After Covid and all these things, it is very difficult to predict how the market will or how things will happen. So, it is just to take care of that. This is a floating provision and we cannot use this in the normal course. It is not that if your profits are lower, then you use this provision. You cannot do that. Unless you take a specific approach from the Reserve Bank of India, you cannot use this. So, this is only for real rainy days.
How was your cost of borrowing this time around because the sector saw some pressure on cost of borrowing. Would you like to be able to keep your NIMs around 9.5% on a sustainable basis?
Govind Singh: Two things: One, the cost of funds is almost the same for Q3 – 10 basis points plus minus and I must tell you that we had never borrowed in the market. In fact, we are almost nil borrowers as far as the market is concerned. In fact, we are surplus of about Rs 2,500 crore liquidity as on March 31st.
Whenever we talk of borrowing, it is only sometimes tier 2, which is for the capital purpose or sometimes we take finance from NABARD or SIDBI type of institutions. We are always a net lender in the market as far as the liquidity part is concerned. If you look at the NIM part, as we had guided for the medium term, our NIM will always be 9% plus. It was 9.9% for Q4 but for the year, it was in the range of 9.4-9.5%. With the mix changing over a period of time, we guide that it will always be about 9% if you look at the next maybe two to three years horizon.
RBI directives have come in for small finance banks. The Street believes that in the next two to three years some of the small finance banks will actually be eligible going forward for a universal bank license. Would you be also thinking in that direction or preparing?
Govind Singh: We will be in the same direction, though we are yet to have a clear discussion among the board and how to go about this part. But two things I want to mention about this part. One, this is a very welcome sign, whenever there is a clarity from the regulator, it is always helpful for all the players. So, we also got a clarity now on what the requirements are, how RBI will be evaluating once we approach RBI from small finance bank to universal bank. Certainly, it is a welcome sign and we will also evaluate this part when we actually approach the Reserve Bank of India as far as, you know, moving from a small finance bank to universal bank is concerned. My sense is the next two to three years’ time when we should be looking at this part. But obviously, we still have to have a clear discussion with our board and other concerns.
