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,” Bharucha said. “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.
World’s most-loved megabank is surrounded by a lending crisis
Meanwhile, non-bank lenders from Dewan Housing Finance Corp Ltd. to Reliance Capital 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 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.”