Cost of Borrowing – Crux of lending
Cost of Borrowing is a big component that affects the overall profitability of any lender, either he passes it on to consumer or takes the hit to keep customers happy and intact.
“Typically I would’ve liked to see a drop of 50-100 bps Y-o-Y in my borrowing cost to reflect the improved credit profile, but in the last 6-12 months we have not seen the drop,” said
He added, the rates are flat and expect the rates to come down in the January-March quarter in 2020, so seeking to raise overseas debt NCDs which are listed on BSE, exploring ECBs, for which RBI has relaxed the norms. “We’ve managed to raise sufficient.”.
Since the fundamentals of NBFCs became a concern, banks took a cautious call on deciding on selecting the right players and at what rate they should be lending.
Khaitan further said that recurring businesses like gas stations, groceries and pharmacy are not affected by the wide slowdown. So that segment we’re seeing lending activity as it is.
Times are difficult and seeing the impact of slowdown on our business as well, we’ve stopped lending to auto ancillaries & dealers, consumer durables is another segment, F&B getting affected by app aggregators.
“Good times or bad times, the demand is still high but essential to determine the loan being disbursed is for fuelling growth or survival, if it’s the latter we don’t lend and we move our credit curve upwards and ensure we fund the right person with the right purpose,” added Shah.
Relaxing credit norms for few customers is done by many lenders depending on their risk appetite. Hardika said, “In the past we have taken deviations from our risk policy to lend to some customers. From a risk perspective we’re taking a more conservative approach purely because the particular economic scenario we’re in is unclear, as to in which direction the winds are going to blow.”