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Let private banks remain private and public banks remain public: Keki Mistry, HDFC


Talking to ETNow, Keki Mistry, Vice Chairman & CEO, HDFC, explains the current situation in the banking sector amidst scams and controversies and also talks about the reason behind the current rate hike.

Do you think that the conflict of interest has become a major issue in the banking sector? Also, what are your views on these allegations and scams and will that affect their business?

I do not think credit offtake has anything to do with the so-called scam. The Nirav Modi example is a one-off case. Hopefully, such kind of things will not become frequent in the banking system. On the other hand, certainly credit offtake is beginning to pick up and my sense is that as the investment cycle in India picks up, demand for money will also keep growing.

Before the new controversy there was a clamour for privatisation of banks as well. Now we are hearing murmurs of nationalising private banks. As an industry veteran, what is the right way forward?

I do not think there is any right way or wrong way. I think what we are doing is fine and in my opinion, we must let the private banks remain private and public banks remain public.

But let us talk about the rate revision. What is the rate revision at HDFC and what do you make of the increase in rates?

Well, interest rates have gone up. If one to compare the rate at which we were borrowing money a year ago to the rates today, the costs of funding have gone up. Even after seeing lowest rate in July 2017 and reduction in the governments borrowing programme; interest rates on a 10-year bond for instance are still up by more than 100 bps on an annualised basis. So, this increase in rates is basically done in order to offset the higher cost of funds and in to ensure that the spreads remain stable.

In other words, we have historically targeted spreads in the range of 2.2 to 2.35 and with this increase in rate, spreads will continue to be in this range.

The other thing is that, we have increased the rates now in April but most banks had increased their rates in February and March itself so the MCLR for most banks have already increased.

There is a lot of buzz about HDFCs acquisition of Apollo Munich. Can you help us understand the plan of HDFC for health insurance as it is a growing sector?

We are interested in the health insurance business as it offers opportunities for growth in India and hence are looking at both organic and inorganic growth. However, we have no particular company acquiring at this point of time.

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