I was just going through some of the recent headlines and that tells me that you have increased the fixed deposit rate for some select tenures and select products which is now over 8% now. Does it mean that cost of funds are likely to increase and NIMs will be under pressure because of the entire tight liquidity that we are seeing in the system?
Girish Kousgi: No, we will not have much of an impact because of the increase in FD rates for certain segments. Today if we look at our cost of funds by instrument, the cost of deposit is on the lower side because even today there is a differential compared to us and some of the other NBFCs.

Could you guide us in terms of what is the expectation of cost of funds and NIMs going forward specifically?
Girish Kousgi: We should put things into context. If you look at the last five to six quarters, we have been through a transformational journey. That is in two parts. The first part was to raise capital to work on the corporate book, both on the book rundown.

Since we are not doing business now, it was a conscious call to run down the book, so we ran down the book from almost about Rs 18,000 crore to about Rs 2200 crore. And asset quality on the corporate book has improved significantly. Today the NPA is less than 3% with just one account left on the corporate side. Even on the retail side, for example, last March if you see the retail GNPA was about 5.5% and today as we speak, the overall NPA is 1.7%.

So, we raised capital, we worked on the corporate book, we worked on asset quality, and we are now preparing to be ready in the future. So, all this is part one. Now coming to part two, I think we need to do a bit of work on growth and also to improve margins. So, today our margin is around 3.5-3.6%. We will be able to sustain that for the next few quarters and then it should look to improve. Now what we have done is, last year we got into affordable. We have built a book of about 1300 crores and we see a lot of traction in that.

Fifteen months back, we had 100 branches. As we speak today, we have 240 branches. By March, there will be 300 branches. So, out of 300 branches, 200 branches will be focusing on high-yield business. Out of 200, 160 will be affordable, what we call as Roshni and the next 50 odd branches will be focusing on high-yield business and the balance 90 branches will be focusing on the prime business. The whole effort now is, under phase two, to ensure that we grow. Since the market is good, real estate is doing well, affordability has increased, interest rates have almost peaked, and we see that in the next two quarters’ time rate will start dropping. So, now this is the time for us to leap on to phase two and grow the book faster and also to improve margins.But just coming back to the point that you were mentioning about the running down of the corporate book. You mentioned one of the accounts was left, the NPA which was there in the system. When do you expect the resolution on that and what could be the write-back?
Girish Kousgi: We are expecting resolution of that account in this quarter or maybe in April. I think that is the plan because the resolution is underway. It is a very small account. Therefore, the NPA is just about 2.8 on the corporate side. So, the write-back is going to be very little in terms of what we have provided.

Let’s touch upon your affordable housing verticals loan book, that surpassed Rs 1000 crore mark. Going down the line, what is the outlook then and do you think that this will be achievable? Can we expect the growth rate to continue to sustain at this clip going forward?
Girish Kousgi: I think overall at enterprise level on retail we will be able to grow at about 17% on book and disbursement should be about 24 odd percent. And on affordability, I think this year, the contribution to incremental business will be around 10%. This 10% should go to 20% in the coming year.

When it comes to your disbursements, I know you are talking about healthy growth but there have been some internal as well as external challenges this time around. Have they been completely resolved now?
Girish Kousgi: The last three quarters have been the highest. If you look at the book growth, the book growth on a quarterly basis was on an average about 1000 crores a year back. So, now we have progressed to book addition, incremental book addition of 1500 crores. So, if we look at last few months, last few quarters, the journey towards growth has been really good. One year back, the growth in retail used to be negative or zero. Now, we have reached a stage of 13.5%. We might end up between 14 to 15 this year and next year on retail the growth is going to be 17%.

Could you throw some light in terms of your emerging market strategy in the tier II, tier III series and what geographies are you currently looking at and targeting in terms of how do you plan on increasing the penetrations in this area as well?
Girish Kousgi: So, I talked about 300 branches by March. We basically focused on three segments out of four segments. The first segment is super prime. So, we are literally not there. This is where a lot of big banks and HFCs focus. The next segment is prime, so that is where we are present. So, our 90 branches will be focusing on this segment where the yields are going to be about 70 to 80 bps from the super prime yield level. And the next 50 branches for us, it is called emerging market. So, this is where we focus to take our yields at least 40 bps higher than our prime yield. And, of course, we will have 160 branches on the affordable side, both formal and informal, so I think this is where our yields are going to be 12.5% and upwards starting from the coming year.

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