I do not think so. I honestly believe that that is not the case. We have not seen yet any impact so far in recoveries. Let me highlight two or three things that you have to keep in mind; the first is that if a person has a home loan, a car loan, a consumer loan, a credit card loan, the one loan that he will not default on will the housing loan because that represents security and that is the single largest possession for most families.
People will not do anything which will result in a default on the housing loan, that is number one. Number two, very importantly the average home buyer, is in his late 30s, early 40s. Most of them are salaried employees. They are using that money to service the loans which they have taken.
If you look at a different class of people like workers and daily wage customers who normally borrow money at very high interest rates, the risk of default would be a lot higher there. But they are not HDFC type customers. The average loan size of the new loans we have given in the current year is about Rs 27 lakh. So, you are looking at people who are in the middle income or slightly higher middle income segment. Their jobs are far safer than what would be the case with people who are on a daily wage. So I do not see any material impact on business.
Even after that, we are not seeing any change in applying for loans at least till last week. I do not see any real impact. The only impact I see is that the ability to go out and collect money from customers, for the few people who do not pay regularly, might get impacted to some extent. This is because of the inability to go out and reach out to customers in smaller places.
Otherwise, I think the markets are overreacting to this whole concern about the financial sector and about coronavirus. This is a passing phase and honestly in my view, this offers a good opportunity for people to look at making investments with a long term view.
In the last 72 hours, all big governments have reacted or assured. But we have not heard anything from the finance minister or from the Reserve Bank of India or for that matter from the prime minister in terms of stimulating the economy. Are you a bit disappointed?
People worry and complain a lot about the fact that RBI did not cut the interest rates. In my view, cutting interest rates is not going to result in any big stimulus to the economy or anything of that sort. What is needed from the central bank is some degree of forbearance because the collections are going to be a little difficult for some of the players, particularly in the small income segment. There should be some forbearance where you say that instead of treating NPLs on a 90-day basis, treat them on a 150-day basis. This has been done by several banks across the world and this has been done in the past even by central banks. That is one thing I would hope that RBI looks at seriously.
I do not think cutting interest rates will have any major benefit. Infusion of liquidity is important and RBI has done enough in my view. There is no concern on liquidity. At a time like this, when markets are falling every day, all kinds of wild rumours keep floating around. My request is please do not get misguided by these wild rumours that keep flying around in the market.
What about a big bang fiscal stimulus? Shouldn’t it be time not to worry about fiscal deficit?
I guess that is something the government will look at especially because there is a huge saving due to the fall in oil prices. The fall in oil prices and the fact that consumers are still paying more or less the same amount, is an actual saving in the hands of the government, which I am sure they will pass on to consumers.
Some relaxation in the maximum marginal tax rate can improve consumption. Let us give it time, this is a very recent concern which has really evolved over the last four or five days. Let us give a little bit of time. I am sure they will do something.