Bond yields have moved up by 53 basis points so far in Q3FY18 to 7.19 percent. This hardening of bond yields is likely to impact the cost of funds for non-banking financial companies (NBFCs).
In an interview with CNBC-TV18, R Varadarajan, MD of Repco Home Finance and Nidhesh Jain of Investec Capital Services shared their reading and outlook on the same.
Our cost of funds has come down in the recent past. Most of the banks have brought down the marginal cost of funds based lending rate (MCLR), Varadarajan said.
We are confident of maintaining the present cost, he added.
Speaking about interest rates from banks, he said that funds from banks are at a cheaper rate than before.
On affordable housing segment, earlier there were a lot of issues on the supply side but now a lot of private players are also coming forward. I expect a lot of demand for this sector and housing finance sector will have a good share, Varadarajan added.
Probably in FY19, you will see a lot of improvement in the affordable housing sector, he further mentioned.
Nidhesh Jain said we are focusing on 10-year G-Sec which has gone up almost 60 bps from its lows but the yield curve has steepen.
There will not be immediate impact on cost of funds for housing finance companies (HFCs) and current interest rate for HFCs is lower than what it was three years ago, said Jain.
According to Nidhesh, cost of funds may slightly inch lower in coming quarters as well.
There is a significant impact on yields, he added.
Incremental margins have reduced for HFCs and it will take 5-6 quarters to see the actual impact on net interest margins (NIMs) for HFCs, Jain further mentioned.
Among NBFCs, housing finance sector is the only sector which has consistently shown 20 percent growth with no asset quality issues. We are positive on the sector and HDFC Ltd remains our top pick in the space, he said.
For entire discussion, watch accompanying video...
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