Our risk weight has come down from 100 per cent to 30 per cent, says VP Nandakumar
Sep 09, 2019, 03.40 PM IST
The slowdown is rather a cyclical issue as the finance minister has said it may not be a structural issue, says VP Nandakumar, MD & CEO, Manappuram Finance . Edited excerpts from an interview with ETNOW.
Do you think that surging gold prices are going to impact business and how are you assessing the demand for gold loans?
Yes, it will certainly have a positive impact on the gold loans because for the 10-15 per cent of the people who are always looking at the highest yield that is 75%, higher gold prices will be an advantage. The impact may not be as projected in some circles in the market but of course, there will be some positive impact.
Banks are fairly reluctant to pass on the rate cut benefits and the RBI has asked them to link retail and MSME loans to the external benchmark . Do you think the funding costs will ease for NBFCs?
I hope so because there is a pressure from RBI for the banks to bring down the rates, pass on these benefits of the reduction in the repo rate to the consumers. We may also get the benefit because during the last six months, many things have changed. One, for the NBFCs in gold loan business, when they lent to us, their risk weight was 100 per cent. Now, with the harmonisation with asset finance companies, we also get the benefit of external rating. As we are an AA rated company, our risk weight has come down from 100 per cent to 30 per cent.
Most economists believe the slowdown reflects signs of structural components along with cyclical issues. What is your sense on the entire situation?
It is rather a cyclical issue as the finance minister has said it may not be a structural issue. So, the impact may come down over a period of time.
What margin trajectory do you see in the current tough environment? Is there a case for margin expansion from here on?
No, when we get these benefits or the reduction in our average borrowing, we pass it on to the customers. So we may pass on and with that our margin may not improve.
Do you expect credit growth to pick up in FY20? What is your outlook then on loan growth and disbursements?
It is better now. The second quarter appears to be better than the first quarter. We expect to be able to recoup from the shortfall we had during the first quarter. This year, we believe that our expectation of a CAGR of 20% will be achieved during the current year as projected earlier.
Where do you see the share of non-gold business rising to and how has been the growth picture in non-gold segments?
Gold is expected to grow at a rate of 15% this year. So of course, for the non-gold businesses, the growth was better last year. When we closed last year, the non-gold portion was 35%.It will improve by 1 or 2 per cent towards the end of this year.
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