‘Kerala’s economy likely to bounce back by December’

The maximum impact was witnessed by the businesses that have been physically damaged. Also, people who have Rs 100 to spend will spend Rs 90 on building back. The nature of spending is going to change. This is consumption positive. What I’m excited is they are talking about building a new Kerala. This means good investment and a long range planning. Resources will come to build physical infrastructure. The issue would be to rehabilitate small businesses. There’s near-term pain. I don’t want to trivialise the issue… by the end of the year (December), things will come back. We should not pass judgement for six months. If by October things start looking better and momentum comes back, then massive construction business is going to happen — 50,000 to 60,000 kms of roads. EPC business will do well.

Do you expect a spike in non-performing loans in the state?

In the near term, there will be regulatory dispensation. There won’t be any NPA in the near term. The challenge will be when the 3 or 5 or 6 months moratorium period is over, then they have to pay. That may be a bunched up payment… In January you will have to pay for six months. At that time, there can be some spike. If the economy comes back strongly and it’s only a delay of the demand, then people will manage.

What will be the impact of the rupee’s fall on remittances?

I expect a 30-40 per cent increase in remittances in the near term. At 71, the rupee is attractive. If it becomes 65, you may not see it. NRI customers are looking at good remittances. It’s good to borrow there and send it here. Borrowing cost in Middle East is very low… it’s 2-3 per cent. If you are getting a currency benefit of 5 per cent, the families will benefit.

It means remittances can come closer to $100 bn. How much will remain as deposits?

India was getting around $65-70 billion as remittances. Our bank brings in $ 9 billion, which is 15 per cent of the remittances. It comes through us but people consume, take it out or deposit. Not all of it is deposited. The good news for Kerala — but not for India — is the rupee depreciation. Money is coming in significantly. When Middle East does well and the rupee is weak, Kerala benefits.

What’s your assessment on the rupee. Will it fall further?

Our internal house view is that 71.50 or 72 seems to be the more realistic level. The weakening is linked to other currencies. Second, the rupee was stronger than what it should be in 2018. I think it was correction that’s happening. The high crude price is having a bearing. There are versions that the oil may go above $80 a barrel and the rupee may go to 74.