Where are you seeing the cost of the borrowings and why are the yields lower for your company going ahead?
Basically, it is a better utilization of funds that help us to expand our net interest margin. We were carrying a 6 months liability requirement as cash, which we have reduced last month where we have done some buyback. Also we have paid back on large quantum of international borrowing, the ECB bonds. So that has helped us in improving our net interest margin. Otherwise, the quarter-on-quarter or month-on-month, our cost of borrowing has not gone up from the last two months or three months so that also has helped us. Overall, we are able to raise resources at the current level to three months back level. Plus, we are also repricing some of the older loan which were at higher cost as and when it is maturing.
Especially 80% of our borrowing is in the fixed tenure and fixed rate and only 20% is floating. So floating gets changed immediately whenever there is a repo rate change but the fixed one changes only when it gets matured.
What I want to ask about is your disbursement growth that has been strong this time around. Now how should one actually view this in terms of the risk on this incremental book and will the credit cost actually continue to trend lower then?
Yes, definitely the disbursal is very strong. The demand in commercial vehicle, two-wheeler, especially the last quarter was very high and the rural demand has come back very strongly. The tractor credit, even though we do mostly used vehicle, the demand in the rural area has come back very strongly and commercial vehicle continues to remain very strong because the infra spend continues, and there is a demand for CVs, especially both new and used.
So I think the growth is looking good even in this quarter and as far as the credit cost goes, since the vehicle utilization levels are very high and recent values of vehicles are quite good, the credit cost automatically comes down because the risk of non-payment is less plus the requirement of reposition also is very minimal.
With that the credit cost is coming down, I think it will remain steady at around 2% which is our long-term history of 2%. We are just below 2% now for the first nine months, it is around 1.94. We should be able to maintain at this level going forward for a considerable long time.
Do you actually plan to raise any money from the market given the new amendment for the interest on market linked ventures? Do you see this as an instrument of as a concern going forward?
We did not use this instrument extensively, it is a very-very short, small portion of our life borrowing. So we will not be impacted by that. We can always have other private placed NCD, we need not really go through MLD essentially.