17
MUMBAI: Top bankers, from Aditya Puri of HDFC Bank to Rajnish Kumar of State Bank of India, believe that the Indian regulatory regime has been far tighter than that in the developed markets, limiting their ability to fund growth even as the bankruptcy law brings in credit discipline.
“I don’t see why we are being holier than thou, when we say that we have capital requirements which are better than those in the rest of the world… we are putting unnecessary strain on ourselves,” Aditya Puri, MD of HDFC Bank, said at the 5th SBI Banking Economics Conclave.
“Why do we have a risk weight of 125 per cent on retail assets Why do we have capital adequacy which is 1 per cent higher than the rest of world If we were on a par with global standards, it would reduce capital requirements by at least 1 per cent ,” said the head of the country’s largest bank by market capitalization.
Bankers also stressed the fact that the provisioning war chest created by Indian banks was also downplayed: The provisions, they believe, would go a long way in securing the banking system.
“When we look at the overall number of gross NPAs, we get bogged down by that,” Rajnish Kumar, Chairman, State Bank of India said.
“But our analysis showed that provision coverage ratio of most banks is above 50 per cent so we are adequately covered against potential losses.
We are not underestimating the problem but it’s not that the entire world is on the brink of collapse.
That is not the right way to look at it.”
Overall, India’s biggest banks remained bullish on the growth of the Indian economy and said that it had a potential to expand beyond 7.5 per cent despite global headwinds.
“We are in a very sweet spot as far as the micro economy is concerned; At this stage, it is possible that the economy will grow at 7.5 per cent or higher,” Uday Kotak, Vice Chairman of Kotak Mahindra Bank, said.
“Of course, there are headwinds.
Oil up to $80 is alright.
Beyond that it is something we need to be worried about.
The good news is that monsoon is in good shape, which will be a good counterbalance.”
Bankers also pointed out that a knee-jerk reaction to the rising rupee and crude oil prices was not warranted because fuel prices appeared transient in nature.
“Let’s not get panicky because the rupee is rising.
It will settle around 67-68; no knee jerk reaction is required,” Puri said.
“Even the oil prices, sooner or later, will settle around $70-72, which is not bad.
And relative to the rest of the world, we are not that focused on exports.
So as we settle down, India will be less affected.”
