 "BS Banking Round Table: Liquidity-flush banks ready to fund growth")
With the economy seemingly close to turning around, aided by a pro-reforms government at the Centre, leading bankers have said they are ready to fund growth, though investment in new projects could take another 12 months.
On a day when the central bank maintained status quo on interest rates, the bankers, speaking at the Business Standard Banking Round Table here on Tuesday, refuted the logic that bank funding was coming in the way of growth.
“To say that growth is not coming because banks are not financing is wrong. We have more than enough liquidity to fund if a project is good,” said State Bank of India Chairman Arundhati Bhattacharya.
Union Bank of India Chairman and Managing Director Arun Tiwari agreed. “We are enablers and have enough capital,” he said.
According to bankers, the number of new projects had significantly come down since 2011. “Just two months ago, we saw the number of non-infra projects had fallen from 17 to three. So, it is more a question of getting projects off the ground than financing,” Bhattacharya said.
ALSO READ: Key quotes from top bankers at BS Banking Round Table
In this context, bankers saw initiatives from the government, be it pushing stalled projects or the fresh auctioning of coal blocks, as steps in the right direction. “We are definitely seeing more government focus on clearing some of those bottlenecks. For instance, the coal auctions were very well thought through. We are seeing all the right signals,” said Axis Bank Chief Executive Officer and Managing Director Shikha Sharma.
The recent surge in capital flows into India has made bankers optimistic about growth picking up. “Next year, we expect things to be better. We will expect earnings growth in the range of 16-17 per cent next year. India is on a growth trajectory,” said Deutsche Bank India Chief Executive Officer Ravneet Gill.
Bankers, however, said there was a need to improve credit discipline in the Indian corporate sector and introduce stricter laws, which existed in developed countries. Banks have been seeing a surge in non-performing assets through the past few years.
“We need something on the lines of a chapter 11 (of the US) here. If a project becomes unviable or if takes a hit, the equity should take the hit first and if the company still suffers, they have to leave. There have to be laws to enforce that,” said HDFC Bank Managing Director Aditya Puri.
The government is planning to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act during the ongoing winter session of Parliament to effectively deal with the issue of bad loans, especially those resulting from suspected wilful defaults.
On the constraints faced by banks, Citi India Chief Executive Officer Pramit Jhaveri said there was an urgent need to look at the priority sector lending regime foreign banks faced in India.
C S Ghosh, chairman and managing director of Bandhan, which has secured an in-principle approval to set up a bank, said the challenge was twofold: training its 14,000 employees to become bankers and proving to the world that “we can become a bank”.
On a day when the central bank maintained status quo on interest rates, the bankers, speaking at the Business Standard Banking Round Table here on Tuesday, refuted the logic that bank funding was coming in the way of growth.
“To say that growth is not coming because banks are not financing is wrong. We have more than enough liquidity to fund if a project is good,” said State Bank of India Chairman Arundhati Bhattacharya.
Union Bank of India Chairman and Managing Director Arun Tiwari agreed. “We are enablers and have enough capital,” he said.
According to bankers, the number of new projects had significantly come down since 2011. “Just two months ago, we saw the number of non-infra projects had fallen from 17 to three. So, it is more a question of getting projects off the ground than financing,” Bhattacharya said.
ALSO READ: Key quotes from top bankers at BS Banking Round Table
In this context, bankers saw initiatives from the government, be it pushing stalled projects or the fresh auctioning of coal blocks, as steps in the right direction. “We are definitely seeing more government focus on clearing some of those bottlenecks. For instance, the coal auctions were very well thought through. We are seeing all the right signals,” said Axis Bank Chief Executive Officer and Managing Director Shikha Sharma.
The recent surge in capital flows into India has made bankers optimistic about growth picking up. “Next year, we expect things to be better. We will expect earnings growth in the range of 16-17 per cent next year. India is on a growth trajectory,” said Deutsche Bank India Chief Executive Officer Ravneet Gill.
Bankers, however, said there was a need to improve credit discipline in the Indian corporate sector and introduce stricter laws, which existed in developed countries. Banks have been seeing a surge in non-performing assets through the past few years.
“We need something on the lines of a chapter 11 (of the US) here. If a project becomes unviable or if takes a hit, the equity should take the hit first and if the company still suffers, they have to leave. There have to be laws to enforce that,” said HDFC Bank Managing Director Aditya Puri.
The government is planning to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act during the ongoing winter session of Parliament to effectively deal with the issue of bad loans, especially those resulting from suspected wilful defaults.
On the constraints faced by banks, Citi India Chief Executive Officer Pramit Jhaveri said there was an urgent need to look at the priority sector lending regime foreign banks faced in India.
C S Ghosh, chairman and managing director of Bandhan, which has secured an in-principle approval to set up a bank, said the challenge was twofold: training its 14,000 employees to become bankers and proving to the world that “we can become a bank”.