State Of Economy

Q.  How do you see the road ahead for public sector banks in India following the NPA mess?

A. This was bound to happen someday, good that it happened early and our apex bank has taken note of it and working towards a solution. I suggest, build a bank, park all the NPAs of all other banks there. Get best set of people to dispose all those assets and then, go for a consolidation. India really lacks in having an international bank though we have 27 public sector banks and dozens of private banks. Why not consolidate—let SBI pick up few ailing banks, let SBI be run an efficient banker and turn that into a world-class bank, having presence in India and also other parts of the world. The government now should come forward and clean up the debt stains from these banks’ balance-sheets—someone has to book the losses, in this case, it must be the government. Once this process is implemented, I find brighter days ahead for the public sector banks in India, though the numbers of such banks will come down drastically. Tell me which country runs 27 banks? Consolidate as early as possible.

A. I have a question for these banks—how come your managers sanction loans to Mallya against collaterals, some of which are not even owned by him or some of which are not even worth the loan amount disbursed to him. All these years, these public sector banks have disbursed loans through a very inefficient system and now they all have been paying price for their own blunders. Quality of loan management has to be improved. Due to such mistakes on part of the banks, as some biggies have been defaulting, smaller borrowers are facing the heat for no mistake on their part. The entire banking system here needs to be overhauled under guidance of Narendra Modi and Raghuram Rajan. Modi has to be do it himself by taking extra initiatives—he should not depend on his men in Finance Ministry.

A. See, India is a big enough country to accommodate foreign players in most of the sector. This country and its industrialists do not have reasons to get scared because of their overseas competitions opening up shops here and run their businesses. Let there be fair competitions—Indian business houses have the capabilities of winning over their foreign counterparts. Allow FDI maximum in almost all the sectors. If the government works out a proper entry and exit rules for FDI, I don’t see any problem anywhere. These rules are to be framed, put in place and implemented strictly. But allow competition, it benefits not only the corporates in India but also consumers, investors. FDI does not mean monopoly.

A. You saw what happened to Cairn and Vodafone—taxation policy here has to be consistent and simplified. A similar set of tax rules should be in place for domestic companies as well as foreign entities. If taxation policies are simplified, India becomes a larger power and if we remove the existing obstacles, we can be the fastest growing economy in the world. Modi should see to it.

A. This surprises and shocks me. Why there is a lack of competition among the banks? Why some of the banks can’t come forward and pass on the benefits of such rate cuts to the consumers and make the game interesting. Let the banks compete against each other, the government banks I mean. Our government banks here have lost the game already to their private counterparts and now why kill them further—the policy has to be relooked at.  Raghu (RBI governor Raghuram Rajan) is efficient and during his regime, things are improving, banks are getting a better, cleaner path to sail. Now time has come when major corporates in India should also get into setting up banks. We need more private banks—may be even government now should start privatising some of these 27 PSU banks.

A. They will play an important role in the future but at the same time, we also need usual banks which will continue in the path of credit creations. Now once you have payment banks in place and their presence is felt strong, gradually typical brand-based transactions will get lessened and someday even may disappear. This will help main banks to handle credits efficiently, handle mortgages and loan disbursements skilfully. This will also diminish the rising NPA menace and a healthy banking system will be in place in India. But remember, all the while when it comes to payment banks reaching out masses, technology will play a major role and I am sure, India having given birth of companies like Infosys, Wipro, will never have lack of brains to run these payment banks and getting their systems improved everyday.

A. Let me tell you clearly, if the government handles things the way it has been expected to be, achieving 9-10 per cent of GDP will not be an issue. But unfortunately, let me tell you—Modi really did not understand complexity involved in running a government when he took charge of the country. He thought things would be easier but it never been so. I must tell you, in last two years, it has been a very slow reform process. Modi is now looking at maintaining status quo rather than making things better for the people in India. The government is not generating jobs, doing business is still not an easy task in India, infrastructure growth is still not as expected. Meanwhile, you see, farmers are killing themselves being in distress. Try and understand, Modi’s Make In India idea will add to skilled jobs but how the government manages to generate jobs for unskilled people if not much happening in the low-technology and infrastructure sectors. I think, in next two years, India’s GDP will continue with the level of 6-7.5 per cent. Meanwhile, markets will continue to remain nervous unless promised reforms are in place. I even do not rule out a financial crisis sometime from now.