Stimulus, lockdown exit plan will help assess full Covid impact: Uday Kotak, executive vice-chairman and MD, Kotak Mahindra Bank

A full assessment of Covid’s impact on Kotak Mahindra Bank’s loan book will only be possible after clarity on government fund flows to various sectors, executive vice-chairman and managing director Uday Kotak told reporters. Job losses may put pressure in the unsecured retail segment, he added. Edited excerpts:

What kind of stress tests have you carried out in order to assess the full impact of Covid?

We have divided it into two sets — up to March 31 and after March 31. If you look at the Covid provisioning plus standard asset provisioning plus the other provisioning which we have for stressed sectors, the total provisioning other than the direct NPA provisioning we carry takes care of the net NPAs fully. That means that if you take our gross NPA or the provisioning which we have done towards specific accounts which gives you net NPA — 0.71% — and then you look at our standard provisioning plus Covid provisioning and others which are independent of direct provisioning, the total provisioning is more than the total net NPA. Therefore, we start April 1, 2020, with a clean slate in terms of the balance sheet from the point of view of all provisioning which we felt was necessary and actually more than the net NPA figure itself. Now, the next question is how does the current year look? We are in a completely uncharted territory. We can discuss and come out with any number and with reference to different sectors. While we have done work in different sectors, a lot will also depend on how the opening up of the lockdown happens, how the stimulus is given, which sectors are going to get it, an appropriate time for a real stress test will be once you have a better handle on how the flow of funds from the government to the system will happen.

Your advances have grown 7% y-o-y in Q4 and the credit card portfolio has de-grown sequentially. Are you going slow on unsecured retail lending?

We had become conservative, even cautious, on advances well before the event. Therefore, our growth in advances by design was more calibrated than the Street in general. I have believed that retail unsecured is where at some point of time pressure is going to come. Therefore, our portfolios on unsecured consumer retail have actually been far more conservative than our earlier perspective. The post-Covid era helps us reduce the impact of the potential burden which may come out of stress, particularly in unsecured retail which is pretty sensitive to the lockdown and the slowdown in the economy. So, we will wait for the stimulus.

Is there a ballpark credit growth figure you are looking at for this financial year?

At this point, we are waiting to see how the economy shapes up. We have received very wide estimates by expert economists on growth for the current year. We deliberate every single day on how we can navigate and what are the opportunities we could take. We are of the view that we will be going out there and supporting the economy, provided we get the right comfort on the risks we take.

Are there any sectors where you do not plan to lend or where you would de-grow your book?

If you see the way we have constructed our book, you would see that we have gone cautious for some time now on unsecured consumer lending. That’s something we will be cautious about because we just want to make sure that the consumer is well-protected. Just as a small businessman is getting into trouble, so also if many companies start retrenching people, which is not something you can assume won’t happen, but should that happen, even unsecured lending to salaried customers will come under pressure. I would like to see the consumer side getting more comfortable and then we would be ready to take calls.

Then of course, sectors more directly affected by Covid will also be watched, be it tourism, hospitality or retail malls. But, we will have an open mind and be ready to change our view, should the facts change.