It's a cash flow problem, we need an unscheduled rate cut: HDFC Bank managing director, Aditya Puri

• HDFC Bank’s managing director Aditya Puri called for an unscheduled interest rate cut.
• In an interview with CNBC TV 18, Puri also recommended that the government should relax the terms of loan repayment.
• He assured stockholders that HDFC Bank is in a strong position with $5 billion in cash and the banking sector will safely weather the Coronavirus pandemic.

HDFC Bank’s managing director Aditya Puri isn’t worried about the markets tanking. In fact, he’s optimistic that the banking sector will survive the current crisis despite the Indian stock markets hitting a lower circuit again today, March 23. As the Nifty Bank index also suffers from the pandemic, HDFC Bank stock lost 506 points in three months.


As the equities markets are drying up, Puri said that the economy will land in a cash flow problem, in an interview with CNBC TV 18. Puri asserts that the crisis in the economy is not a case of companies failing. “This is a cash flow problem that should be helped by the government,” he said.


Instead of just focusing on financial markets — the entire economy needs to be taken into account, Puri said. He expressed the need for an unscheduled interest rate cut, ahead of the monetary policy revision scheduled for April 3. In addition, the government should issue a directive to relax the terms of loan repayment.

HDFC Bank is in a good position with $5 billion in cash: Puri

Unlike many of its peers, HDFC Bank is not troubled by large loans given to troubled promoters, as over a $4are given to retail customers. Puri insists that HDFC Bank is in a good position with $5 billion in cash and nearly 80% of its loans given to AAA-rated companies.

Majority of unsecured loans in the retail sector have been given to salaried employees. “This majorly comprises of good and strong corporates, and government employees. Repayments continue to remain healthy currently,” said UBS Global Research’s report.


‘Likely to see a dip in credit card spending’
Yet, Coronavirus is playing its part in derailing trade and that has had an impact. The bank did see a dip in credit card spending in March despite healthy levels in January and February, according to UBS' report. It could spell trouble for the largest issuer of credit cards in the market, which garners nearly 27% of the market share as of February 2020 — which has fallen from 30% in 2015.

When it comes to online spending in particular, HDFC believes that there will likely be a dip due to the lockdown, which will restrain the movement of delivery personnel and take a toll on supply chains.

Despite assurances, Bernstein — a global brokerage firm — downgraded HDFC Bank to underperform in the ‘pandemic driven environment’. “HDFC Bank's portfolio is most exposed to unsecured consumer credit risk versus peer private banks,” said the agency’s report.

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