INSUBCONTINENT EXCLUSIVE:
Muted loan growth has hardly dented the upward march in HDFC Bank's shares.HDFC Bank Ltd., India's most valuable lender by market
capitalization, sees tentative signs of a revival in rural areas at a time when the wider economy is sputtering."The recent loan outreach
programs underway in rural areas have given us the sense that the consumption in rural and semi-urban areas is turning more positive," HDFC
Bank Executive Director Kaizad Bharucha said in an interview last week
As of end-September, 52 per cent of the bank's outlets were in rural and semi-urban India, a part of the economy that accounts for at least
half of the national output.Prime Minister Narendra Modi's government has unveiled several steps to boost the economy, which is growing at
its weakest pace in more than six years, including a surprise $20 billion corporate tax cut
The Reserve Bank of India is expected to cut interest rates again this week, after Friday's report that gross domestic product growth slowed
to 4.5 per cent in the September quarter.For HDFC Bank, the weaker economy had led to a slowdown in loan growth, which eased to 15 per cent
in the September quarter from 23 per cent a year earlier
But it remained healthy compared with the overall banking system which saw credit growth slowing to a two-year low just above 8 per cent."As
a bank we are well positioned to offset a slowdown in either the consumption or investment side as we are present across the spectrum," Mr
"The demand for credit is not going away
It may just be subdued for a period of time," he added.He's also cautiously optimistic about the outlook for corporate investment, based on
the bank's soundings with Indian executives.Muted loan growth has hardly dented the upward march in HDFC Bank's shares, which are about 19
per cent higher so far this year
Now valued at about $96 billion, the company trades around 26 times projected 12 month earnings
That's almost three times more expensive than the Bloomberg World Banks Index and is the biggest valuation premium on record.Meanwhile,
non-bank lenders from Dewan Housing Finance Corp Ltd
have been reeling under a 17-month credit crisis after Infrastructure Leasing - Financial Services Ltd
defaulted on its debt last year
In a further blow to confidence, the Securities and Exchange Board of India placed curbs on operations of Karvy Stock Broking Ltd
after finding evidence it misused client funds.But Mr Bharucha doesn't see a wider industry problem."There is enough control over
stockbrokers and depositories and a default in the segment will not have a systemic impact," he said
The central bank "has ensured that there is adequate liquidity in the system and availability of credit is not a problem."
