There is no dearth of money, only the cost has gone up: Keki Mistry, HDFC

One should not get unduly worried just because one builder has delayed making payments. One company does not represent the country as a whole, Keki Mistry, VC & CEO, HDFC, tells ET Now.

Edited excerpts:

How critical are the RBI measures and how important would they be to easing liquidity pressure in the system?

It would certainly help. It is a very good measure that will particularly benefit the larger NBFCs and housing finance companies, where the banks would have reached their exposure limits.


There is a fear in the market that some prominent HFCs have given loan to builders that are going belly up. Should one be a bit wary of these concerns?

One should always be cognisant but we are not seeing any stress of that sort in the system. If a builder delays making payments, it does not necessarily mean that it is going belly up. It could also be a short-term liquidity crisis, but the project may be still very good. I do not think one should get unduly worried just because one builder in the country has delayed making payments. One company here and there does not represent the country as a whole.

Do you think that all these liquidity concerns could result in a delayed recovery in the housing market or would that be extrapolating in stretching the issue?

It is extrapolating in stretching the issue. I do not think it will lead to a delayed recovery because the loans are available for individuals. Money is available. If people want to buy a house and are looking for a loan, they can get the money.

How deep is the problem and how much more would it take to support the liquidity situation meaningfully?

RBI is taking the right steps and doing the right thing. In terms of increasing the exposure limit from 10% to 15%, it will go a long way in improving the situation at least for the larger NBFCs.

Do you think the entire view on the liquidity crunch in the HFC sector and smaller HFCs really feeling the pinch, has been slightly stretched as has been the market reaction?

HFCs’ source of funds can vary from entity to entity. An entity like HDFC, for example, borrows money from overseas. We raise money through ECBs, Masala Bonds, the domestic bond market, deposits and a variety of sources. Commercial paper is just one of the many sources through which we raise money. Smaller HFCs will get refinance from NHB.

For smaller HFCs, the source of funding historically used to be the CP market and loans that they use to get from banks. The refinance money they used to get from NHB. They did not go to the overseas market. They did not have ECBs. They did not have deposits and stuff like that. So smaller HFCs can be affected by any tightness in the market, any risk averseness on the part of banks.

The larger HFCs which have got accessed to a variety of funds can switch their funding sources from one to the other, depending on the cheaper form of funding at that point in time. Even today, you can go to the commercial paper market and raise money. There is no dearth of money. It is just that the cost of money will be higher than what it was couple of months ago.