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Banks need to step up lending to businesses: KV Kamath – The Economic Times


Mumbai: India is putting in place the right blocks to fight the economic fallout of the pandemic, but the banking industry needs to step up to the plate in lending to businesses, shedding risk aversion. Policymakers can also turn a blind eye to rating downgrade threats due to their inherent bias, veteran banker KV Kamath told ET in an interview.

“A bank, which has reasonable NPAs (non-performing assets) but is growing, will survive, while another one with the same level of NPAs but no growth will see capital wiped out in next 3-4 years,” Kamath said, referring to the apparent risk aversion of bankers.

As India’s border dispute with China spills over to economic and business activities, Indian businesses should indigenise as they have acquired enormous capacity in the past decade, he said.

“That is a question the industry themselves must answer,” Kamath said in response to a query on how industry should react to PM Narendra Modi‘s ‘Atmanirbhar’ call.

Future Role

“To what extent would we like to indigenise and what are the related challenges. About 5-10 years back we didn’t have scale, but today, our industry has scale. I hope this challenge will present an opportunity to look at dynamic trade opportunities across the world,” he said.

Kamath, 72, who recently stepped down as president of the Shanghai-based New Development Bank, said he “was available for anybody who wants to sound me out”, in response to a question on whether a role in government could be on the cards.

Responding to a query on the management of the pandemic, he said there could be a central protocol based on the experiences of cities which have already opened up. “The challenge that Bengaluru is now facing could have been addressed because we know what Delhi and Mumbai faced.”

Kamath is credited with transforming a sedate Indian banking industry that was content lending just to the government and known business groups. He was instrumental in spearheading the concept of universal banking in India and transformed the lumbering developmental financial institution ICICI into a vibrant retail lender.

While the banking industry may be suffering from the past memories of bad loans, it should not turn risk averse and choke credit flow to industry, he said.

“We always say that bankers’ karma is to lend,” said Kamath. “If you look at any developmental greenfield project, at best it has a BB rating irrespective of who promotes it. Without these BB projects coming into the system we cannot grow. We need a mindset change. But I am very clear that without these startup projects in either manufacturing or infrastructure sector, our growth aspirations will be contained.”

India’s monetary and fiscal package have been “well crafted” without blowing up the nation’s financial metrics, but the state should not be a prisoner of an outdated idea that’s still driving rating companies.

“Looking at fiscal deficit as a parameter is old world,” he said. “In this new world it needs to be seen whether some of these old-world metrics even apply anymore. We need to look at addressing these issues in a way that meets our needs and goals. And this is an issue that is not India-specific, even the developed world will face these issues. But the rating agencies will look at them in a different way. We as a nation have always been responsible, I don’t expect that will change.”

Kamath was the first port of call for the Modi government when it needed a candidate to head the NDB, a development bank assembled by Brazil, Russia, India, China and South Africa. His achievements as a banker and the acumen accumulated over the decades makes him, according to some, still a candidate for a role, including the government. At one stage, speculation was rife that he could join the finance ministry of the Modi government.


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