Banks reluctant to lend, says Parekh
After L&T’s A.M. Naik and Bajaj Auto’s Rahul Bajaj, now HDFC chairman Deepak Parekh has also acknowledged a slowdown in the economy, but added that it could be temporary.
Addressing the annual general meeting of the mortgage lender, Mr. Parekh said: “Evidently, there has been a distinct slowdown in the economy which was reflected in a lower GDP growth of 6.8% in FY19. While there has been an across-the-board slowdown in consumption, given the inherent demand and low penetration levels, I do believe this is temporary in nature.”
He said demand for affordable housing remains adequate in the country, which has been supported by the government’s flagship credit-linked subsidy scheme and incentives provided to developers to increase the supply of affordable homes. He also said the demand for commercial real estate had been buoyant, especially across the top 8 cities.
However, the challenge in the housing sector has been with the upper middle segment and high-end luxury housing. “It is this segment where unsold inventory levels are high. This is where the price of the apartments are typically above ₹2 crore,” he said.
The problem was compounded with the tight liquidity situation prevailing since September 2018, which particularly impacted non-banking finance companies and housing finance firms. The challenge today was risk aversion, he added.
“Banks are reluctant to lend and there has been a flight to safety where a select, few, high-rated NBFCs and HFCs have access to funding, while for several others, access to credit has been chocked,” he said.
“One is hopeful that normalcy will be restored soon and by the time the festive season sets in, some of the risk aversion should taper off …to my mind, what is critical is re-instilling confidence in lenders to support growth in the economy,” he added.
HDFC net rises 46%
Meanwhile, the lender posted a 46% rise in its net profit to ₹3,203 crore for the April-June quarter on the back of the sale of its arm Gruh Finance to Bandhan Bank. It had posted a net profit of ₹2,190 crore a year earlier.
The profit before tax for the quarter was at ₹3,985 crore compared with ₹3,070 crore in the previous year. “This is inclusive of the profit on sale of investments on part stake sale of Gruh Finance of ₹1,894 crore during the quarter ended June 30, 2019,” HDFC said. Asset quality worsened mainly due to slippages from the non-individual loans. Gross NPA was at 1.29% at the end of June as compared to 1.18% a year ago.
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