Need more in terms of regulations to tackle the crisis?
We have done more than enough. We have taken a very conservative scenario and things are happening faster than we assumed. There is already some lifting of the lock in green and orange zones, while we had assumed a complete shutdown until early June. Now there is enormous wealth for economic activity to be lifted sooner rather than later. All of it promotes well for our assumptions. We have completely stress-tested our portfolio. Even on the higher side, our credit costs for FY21 will be around the FY20 number. We have taken additional provisions on 17 basis points for Covid-19 and another 30 basis points to increase determination coverage … we are confident that things will be better than our guide.
What about the bank’s profitability in the next financial year?
Our profitability will be better for FY21 than FY20. In our credit card business, spending is already rising in the first days of May toward April. Under the prevailing circumstances, it may be the game changer because the desire for consumption is there. Soon, a whole host of non-essentials for home delivery will be opened online, and card use will go up. You may not spend on travel and tourism, but you will spend on other things. Consumption of essentials is already much higher than before. We are very confident of a V-shaped flashback to the card business, and this is where our upside is. People are also willing to make payments once they had applied for one moratorium, which is a good sign. Even in business, we start with a perfectly clean slate… there will be some risks due to the Covid-19 outbreak, but this is again minimal because our relative exposure to these sectors is very small.
What about microfinance loans and the MSME business?
Our total MSME portfolio is approx. 1.5% to 2% of our book. Non-wholesale book is 55%. In micro banking, the scenario is most positive compared to other segments. We had granted moratorium to 100% of borrowers, but as of May 4, we began to open rural. We have already opened 700. Rural India has not been much affected by 90% in green zones. We funded local livelihoods and economic activities that have no connection to urban centers. These customers are eager to get started again. We are already seeing signs of normalcy and we expect to open all branches by the end of this month. Between credit cards and micro banking, which make up 28% of our portfolio, they will show some growth this year. But we look at the small business collateral loans because of the impact of the outbreak.
You saw some deposit outflows in March …
Since March, everything we have lost has been recovered. In one month alone, we had a 4% spread with Rs 2,500 crore of new deposits, which came to Rs 60,300 crore of total deposits per month. April 30, which continues to grow because 80 new branches were added in the last six months. Our current savings account portfolio is unaffected. The challenge is not deposits, but using the extra liquidity that we are sitting on. Our liquidity coverage ratio is at 165% with Rs 8,000 extra liquidity. But we will have to live through this phase. Our margins do not decrease by more than 5 to 10 basis points because our wholesale loan ratio will decrease further, dampening the fall in the net interest margin.
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