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Kotak Mahindra Bank’s home loan portfolio, including loans against property, expanded 72% in the last two years to 80,975 crore. In fact, mortgages are important for the bank to acquire salaried customers, a key target group for the bank’s growth strategy. 

In an interview, Shanti Ekambaram, a whole-time director-designate, Kotak Mahindra Bank, said the private sector lender is yet to witness any slackening of demand for home loans, despite rising interest rates. Edited excerpts:


How do you plan to not just add more customers through 811 (a digital bank account) but also ensure their average savings account balances are somewhat on a par with overall bank levels?

Rather than comparing chalk and cheese, let us compare them with digital accounts elsewhere in the market. Customers acquired through branches are quite different. Customers of 811 are young millennials and ‘zoomers’ who are opening accounts in an easy manner within three minutes. Also, acquisition costs for these accounts are a fraction of the cost for accounts we acquire physically. 811 account holders are millennials and we are catching them young. They want different product propositions. They want sachet products and small ticket payment options, both for investment as well as credit offerings. They belong to the consumption class as they are below 30 years of age. Even within these group we had disclosed an average number for account balance. There are people with higher values who open 811 accounts, and we migrate them to the relevant customer relationship teams.

What is the bank’s strategy on home loans?

Home loans are a great way to acquire salaried customers. Historically, we were acquiring customers through the savings bank route. Two-three years ago, we said, let’s open the gates to customers. We had launched competitive rates to attract customers when interest rates and cost of funds were low. You have to move with the market and even today we are quite competitive. It is a flagship product strategy for us even today. If you are willing to extend a person a home loan of 50 lakh, you will also be happy to give them a credit card. They keep at least 2.5-3X more balance with the bank as we insist on a savings account with a home loan. We acquire customers through the home loan route and ensure they become regular banking customers. These customers are a mix of internal and external ones that we acquire from the market. About half of them are existing Kotak customers and the rest are from the open market. 

As interest rates go up, are you seeing mortgage customers postpone borrowing plans?

Buying a home is an emotional decision. Right now, we are continuing to see demand and are not seeing any decline. Builders have not raised prices because they still have inventory. Rate hikes have not impacted demand as yet because these rates are still lower than when I bought a home about 15 years ago. We are not seeing any impact on demand as yet and any postponement of purchase is normally not linked to interest rates, but other factors. It could be property prices, jobs, transfers and is in the ambit of personal decision-making. 

With a large bank back in the credit card market and another in the process of an acquisition, how would you look to position yourself?

For the past four quarters, credit card acquisitions have been going up significantly. From a product perspective, we have a card for every segment. We have recently introduced an ultra-premium card for ultra HNIs (high networth individuals), White Reserve. We primarily distribute to our customers, which we offer at various customer origination points, and we will soon go to the open market. Credit card has been a customer engagement strategy, while home loans are an acquisition and engagement strategy. This is another strategic business we have been investing in and will continue to do so.

Considering the rupee has now touched the psychological mark of 80, in what range do you see it from here?

If you look at the past two months, the Reserve Bank of India (RBI) has stepped in to keep the rupee under check at around 80 or just below 80, against the US dollar. The rupee has depreciated primarily because of the strength of the dollar, and not just for India’s macro conditions . Because of the oil prices, India’s trade deficit has gone up and because of the US dollar strength and rising rates, a lot of funds have flown out, but foreign direct investments have come in to balance that. Right now, the way I read RBI, around 80 seems like a sustainable level and if oil stabilizes at $100-105 per barrel, then rupee will be fine, unless there are other global shocks.

How is the response to the new NRI deposit rules?

We are seeing flows coming in, and in the next few months we will see the full extent of the response. The swap facility in 2013 made a very big difference and that is why you saw huge amount of funds flow to India. But there was also a crisis at that point in time, and I do not immediately see a situation like that. It was a different situation and it needed a different measure. If the swap facility comes, that would be big and you will get big bucks like the last time. That said, I do not see it happening immediately and it is up to the regulators.

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