“The rise in rates has not yet had an impact on mortgages”

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Kotak Mahindra Bank’s home loan portfolio, including home loans, has grown by 72% over the past two years to reach 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, designated full-time director of Kotak Mahindra Bank, said the private sector lender has yet to see any slowdown in demand for home loans, despite rising interest rates. Edited excerpts:

How do you plan to not only add more customers through 811 (a digital bank account), but also ensure that their average savings account balances somewhat match overall banking levels?

Rather than comparing chalk and cheese, let’s compare them with digital accounts elsewhere in the market. Customers acquired through branches are quite different. 811 customers are young millennials and “zoomers” who easily open accounts in three minutes. In addition, the costs of acquiring these accounts are only a fraction of the cost of the accounts we acquire physically. 811 account holders are millennials and we catch them young. They want different product propositions. They want bagged products and small bill payment options, both for investments and credit offers. They belong to the consumer class because they are under 30 years old. Even within these groups, we had disclosed an average number for account balance. There are people with higher values ​​who are opening 811 accounts, and we are migrating them to the relevant customer relations teams.

What is the bank’s strategy on mortgages?

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

As interest rates rise, do you see mortgage customers delaying their borrowing plans?

Buying a home is an emotional decision. At this time, we continue to see demand and are not seeing any declines. Manufacturers have not raised prices because they still have stocks. The rate hikes haven’t affected demand yet because those rates are still lower than when I bought a house about 15 years ago. We don’t see any impact on demand yet and any postponement of purchases is normally not related to interest rates, but to other factors. It can be real estate prices, jobs, transfers and it is a matter of personal decision making.

With a major bank back in the credit card business and another in the process of being acquired, how would you plan to position yourself?

Over the past four quarters, credit card acquisitions have increased significantly. From a product perspective, we have a map for each segment. We recently introduced an ultra-premium card for ultra HNIs (high income individuals), White Reserve. We mainly distribute to our customers, which we offer to various points of origin of customers, and we will soon enter the open market. The credit card has been a customer engagement strategy, while home loans are an acquisition and engagement strategy. This is another strategic activity in which we have invested and will continue to do so.

Considering the Rupee has now reached the psychological 80 mark, where do you see it from here?

If you look at the last couple of months, the Reserve Bank of India (RBI) has intervened to keep the rupee under control around 80 or just below 80, against the US dollar. The rupiah depreciated mainly due to the strength of the dollar, and not just due to India’s macroeconomic conditions. Due to oil prices, India’s trade deficit has increased and due to the strong US dollar and rising rates, a lot of funds have flown away, but foreign direct investment has compensated for that. Right now from my reading of the RBI around 80 seems like a sustainable level and if oil stabilizes at $100-105 a barrel then the rupee will be fine unless there is other global shocks.

How is the response to the new NRI filing 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 huge difference and that’s why you saw huge flows of funds to India. But there was also a crisis at that time, and I don’t immediately see such a situation. It was a different situation and it needed a different measure. If the exchange facility comes, it would be big and you will get a lot of money like last time. That said, I don’t see that happening immediately and it depends on the regulators.

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