Loan Disbursal Slowed 10-30% Post Demonetisation: Kotak Mahindra Bank
Kotak Mahindra Bank sees loan growth slow on account of the cash crunch.
Credit growth has slowed by 10-30 percent as the demonetisation of Rs 500 and Rs 1,000 currency notes hit loan disbursal, especially for discretionary luxury goods, said Dipak Gupta, deputy managing director at Kotak Mahindra Bank.
“The range (of slowdown in credit growth) is more pronounced in places where cash was a large part of even these discretionary products, for example if you look at passenger cars, in general passenger car sales got impacted at the retail level but Ahmedabad is more impacted than Mumbai,” Gupta said.
According to the Society of Indian Automobile Manufacturers, passenger car sales in India grew 1.8 percent in November, their slowest rate of growth since February this year, and two-wheeler sales declined 6 percent. Vehicle sales across all categories registered a decline of 5.48 percent, the steepest decline in 43 months, largely on account of the ongoing cash crunch.
On Wednesday, the Reserve Bank of India said that so far around Rs 11.55 lakh crore of Rs 500 and Rs 1,000 notes had been deposited over the counter at bank branches since November 10. At the same time, the RBI has printed and circulated currency worth Rs 3.8 lakh crore.
According to Gupta, a larger number of the new Rs 500 notes will enter circulation over the next two weeks. However, bank branches are still being prioritised over automated teller machines with respect to stocking of cash. Kotak Mahindra Bank’s ATMs are running at less than 20 percent capacity, he said.
Since November 10, Kotak Mahindra Bank has received Rs 15,000 crore in deposits net of withdrawals and exchanges. Of the total, 60 percent are savings account deposits and the rest are current account deposits.
Kotak Mahindra Bank offers one of the highest interest rates on savings bank deposits in the industry at 6 percent for amounts over Rs 1 lakh and 5 percent for the rest. Despite the slowdown in credit growth, Gupta does not anticipate a significant shrinking in the bank’s net interest margin.
He pegs the impact on margin at around 25 basis points for the month of November.
He also does not anticipate any surge in deposits.
Digital Transactions Surge
The government has launched a slew of measures to incentivise digital transactions. According to Gupta, the cash crunch has already ensured that a lot of customers are increasingly using mobile and internet banking.
A majority of the bank’s bank branches, and therefore customers, are in tier-1 cities.
According to Gupta, the number of existing customers that have moved to digital has increased 60-65 percent over the past month. Debit card transactions outside ATMs during the same period have jumped three times, but tapered off towards the end of the month, he said.
“Actual pure digital mobile transactions are up about 50 percent,” Gupta said.