What is your outlook on interest rates?
A pause (in interest rates) is definitely confirmed and going forward, interest rates would start moving down. This may happen even in the forthcoming monetary policy review (on January 24). The cut may be in the repo rate (now at 8.5%). Bulk of the reduction could happen in the first and second quarter of the next financial year. In the monetary policy review, the repo rate cut may be 25 basis points (bps).

If the Reserve Bank of India (RBI) cuts the repo rate in January, will you reduce lending rates?
Yes, we will do it immediately. This is because, if my borrowing cost is going down, I need to pass it on to the customers.

What is your outlook on deposit and lending rates in the next 12 months?
In the last 18 months or so, the repo rate went up by 375 bps. In the next 12 months, it may drop by around 175-200 bps. If that happens, lending and deposit rates may also fall in the same proportion.

For FY12, your target was 21% for credit growth and 20% for deposit growth. Will you be able to achieve it?
We have scaled down our credit growth target. Now, looking at the overall situation, I feel it should be around 15-16%. We have scaled down our target for deposit growth also. We are comfortable in terms of liquidity. We had similar growth in our deposits also.

What is your outlook on credit growth for the next fiscal?
It is too early for me to say. But I think there will be some demand on account of contraction. But credit growth may not go beyond 15-16%.

Like a few other banks, the Bank of India has also decided to abolish prepayment penalty for home loans with both fixed and floating rates across all tenures, for existing as well as new borrowers. According to you, what will be the implications of this move for banks?
The implications will be none for banks with large balance sheets like ours. Assets get created and repaid, and repayments per se may not have an impact. Therefore, there should not be any prepayment charges.

Agriculture, industry, services and personal loan are contributors to domestic non-performing assets (NPAs) for the bank. Which are the sub-sectors under industry?Are you planning to reduce your exposure to personal loans?
There are some specific industries which are going through problems on account of the large capital expenditure they have incurred. We have seen a large amount of restructuring as we believe that, since we are financing manufacturing and other sectors which are into creating wealth, restructuring should be undertaken for them.

I do not see NPAs driven by a specific industry. But overall, there is a strain on liquidity on account of high interest rates. Any industry which is capital-intensive is finding it difficult for this reason.

Strains are there in industries like manufacturing, engineering, steel and textiles.

Do you think slowing GDP (gross domestic product) will increase corporate debt restructuring (CDR) cases?
Yes, we are already seeing it happening. Telecommunications is a sector which is seeing good amount of CDRs. GTL, for example, had CDR worth `20,000 crore. But CDR cases may increase in other sectors too. When we did a viability study, we saw that most companies are very viable, but they may need some sort of elongated repayments.

Your business per employee has been going down constantly this fiscal from 128 in the end-March quarter to 125 and 123 the following quarters. What are the reasons? How to you plan to restore it back to 128?
We have recruited a large number of people, which is the reason this has happened. We have recruited about 8,000-9,000 people in the last two-and-a-half years. This is official and clerical staff
combined together.

Last month, you announced the deal for 51% stake in Bharti AXA Mutual Fund. When do you expect the deal to be completed, and in how many stages? The deal marks the bank’s re-entry into the mutual funds space. What benefits will it bring?
We have done reasonably well as far as insurance is concerned. In the mutual funds space, a lot will depend upon equity and debt market sentiments going forward. According to rough estimates, we should be in a position to rack up enough sales through our branch network, which would, by and large, meet our capital needs.

We are waiting for regulatory clearance for completion of the deal. We expect all the clearances to be in place by the end of this quarter. By the first quarter of the next fiscal, we will operate as full-fledged joint venture.