I don’t see any substantial impact apart from lowering costs of credit appraisal slightly and future litigation costs. Process remains same but may be speed of approvals will improve.
Real Estate investments are not happening in Ahmedabad, Mumbai and Pune of late - especially in the 25 to 70 lac segment. While Gruh works in a different segment, the impact of slowdown in RE in these regions should be felt there too.
Having said that, the Seventh Pay commission and OROP could help infuse some money in the economy.
With RBI providing the small bank licenses soon, Repco Bank and Repco Micro Finance may be in the fray. RHF won’t be a direct beneficiary, however isn’t there a possibility of cheaper access to funds? Another thing going right for RHF?
"Mr. Varadarjan said that the Central Registrar of Cooperative Societies, a few days ago, had decided to give option to multi-state cooperative banks to relax the superannuation age of MD/Chief Executive Officers from 60 years to 70 years with the approval of Boards of respective institutions.
Repco Bank is one among the two such multi-state cooperative banks in Tamil Nadu coming under the option, which was aimed at retaining talented persons at the top." - The Hindu August 20 2015
Hope that clarifies the MD issue(for repco bank).
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Repco bank is already a promoter of REPCO Home Finance!!
Repco Home Finance Ltd has informed BSE that M/s. Credit Analysis & Research Ltd (CARE) has upgraded the following ratings assigned to the Company:
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Long-term Bank facilities: from “CARE AA-” to “CARE AA”
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Non-Convertible Debentures Issue: from “CARE AA-” to “CARE AA”
http://www.bseindia.com/corporates/ann.aspx?scrip=535322&dur=A&expandable=0
Disc - invested
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This should further help in reducing the borrowing costs. Looks like it’s raining good news for Repco. Further good Q2 results should add more ammunition to the stock rise. 
Disclosure: I own Repco.
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Rating upgrade will help in Repco gaining margins similar to Gruh. It is worth noting that Repco is rated just one notch below Gruh now.
The whole play on Repco now is improvements in NIM and the whole story of growth.
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NIM is function of leverage as well. I will look at RoA for judging the quality of business.
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Just to clarify NIM is not function of leverage. NIM is function of cost of funds and yield you generate on assets.
Leverage is how much assets/loans you give out on your capital base. Increasing/decreasing amount of loans will not have any effect on NIM.
And yes ROA is most important measure to judge performance of financials.
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@nikrod12 , pls help with the following -
If a bank earns say 7% on its tier 1 capital lent to the govt. , does no other borrowing and lending, what is the NIM in this case? (7%?)
Nikhil nim is function of leverage , spread is not.
let me explain if comp has 100 Rs. as capital and 400 Rs. of debt and has advances of 500 Rs. lets assume cost of funds at 8% and yield at 10% so spread is 2%
nim in Rs. will be (50010%) - (4008%) = 18 Rs.
nim as % of advances will be 18/400 = 4.5%
now if they have lower leverage say instead of 400Rs. debt 350 Rs and capital of 150 Rs.
(assuming same cost of fund and yield)
nim will be (50010%) -(3508%) = 22 Rs.
nim in % will be 22/350 = 6.2%
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@vicky_7900: Let me try to calculate. But I am not sure whether my answer will be correct.
Lets assume 100 Rs. of capital. And assuming zero borrowings, balance sheet size will be 100. So Total assets will be 100. The P&L goes like
Interest Earned = 7
Interest expended = 0
Net Interest Income (NII) = 7
NIM = NII / Total Assets
NIM = 7 / 100
NIM = 7%
@kjshah18 : Yes you are correct. I was wrong.
I forgot that whenever a bank/NBFC raises equity capital, it’s NIM increases for short period of time. Though over the period where no equity capital is raised, NIM depends purely on cost of funds and yield. So markets usually do not consider temporary ups in NIM after capital raising. NIM trend through normal operations matters a lot though.
Right. Higher the capital adequacy (the lower the leverage) , the higher is the NIM all other parameters being constant.
nikhil again ,even if there is no capital raised NIM can (may) expand if there is lesser leverage 1) due to decrease or low growth in advances 2) build up of capital (from retain earning ) so going by only NIM will be like "Man with Hammer ". we need to see growth and spread and p/bv and PE also 
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here good example was can fin homes as i bought stock 3yrs ago. people used to say NIM are declining but business growth was such that decling NIM was not worrying part , and stock is 10 beggar . while in early 2007-2011 NIM were rising but business was stagnant.
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@kjshah18 : Great insight. In fact about a year back, I analyzed Canfin and did not invest due to declining NIM trend. Price was 450 then. I learned my lesson 
Hi, Please help me with following.
I want to understand how NIM, capital adequacy, growth and leverage relate.
RHFL’s CAR was 20.26% at Mar 31,2015 and for Gruh it was 15.36%.
RHFL’s D/E was 6.29 and for gruh it was 11.56(taken from screener)
Now as gruh has more leverage on their equity base compared to RHFL, it will help them to disburse loans at higher rate than repco can and also ensure higher ROE. Then why repco is not taking their leverage up? Is Higher leverage a good parameter or higher capital adequacy? Of course, higher CAR makes repco more safe theoretically than gruh. But is it something to worry about?
Is it because repco’s NPA levels are very high compared to Gruh’s and they have to maintain higher CAR?
Also how all of this relate to growth?
Please correct me if I am wrong at any point.
Hi Kunal,
Thanks alot for this explanation with calculation. It was an eye opener for me…changes the way I looked at NIMs
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