Never seen this kind of alignment in banks: KV Kamath at the BS BFSI Summit

Kamath said that he has 'no sympathies' for organisations complaining of not having enough people in a country like India

India, and the world, has never seen this kind of alignment in the banking sector as the banks are consistently running high capital adequacy and maintaining high asset quality with a return of equity of 17-20 per cent, KV Kamath, chairman of the National Bank for Financing Infrastructure and Development (NaBFID) said on Monday. Kamath is also the non-executive chairman of Jio Financial Services.

Talking to Business Standard's consulting editor, Tamal Bandyopadhyay, in a fireside chat at the Business Standard BFSI Insight Summit 2023 in Mumbai, Kamath said that the ability of banks to absorb losses is higher now.

"Larger loans are more stable than the smaller ones. We used to lend at net interest margins (NIMs) of 2-3 per cent. We now see people talking of 8-9 per cent NIMs. The ability to absorb losses is higher," he said.

Kamath added that post-Covid-19 pandemic, India took a measured response. He credited the Centre and the Reserve Bank of India (RBI) for helping the economy.

"Post-Covid-19 and the situation in Europe, we saw inflation rising and India had a measured response. The European Union (EU) did not do much," he said.

"The government provided food support to the masses, RBI took bold steps to keep liquidity and keep interest rates low. This held to turn things around post-Covid."

Kamath also said the digital economy will play a bigger role in India's growth story in the coming years. "Digital economy which is 5-7 per cent currently, will grow to 20-25 per cent of the overall economy in the next few years," he said.

He added that he is "not worried" about the global economic situation as it is temporary.

Kamath also said that the two key reasons behind high deposit rates in India are high inflation and high NIMs. However, he said the central bank should keep an eye on inflation and spreads.

Kamath also said that every non-banking financial company (NBFC) should be treated like a bank by the regulators. "It is for the entity on how it wants to be differentiated with a bank."

He added that the use of technology is going to be a key differentiator. "An NBFC can run with today's technology which is much cheaper," he said.

On mutual funds, the former managing director of ICICI Bank, Kamath, said that the rise of this industry had to happen. "Mutual Funds are taking in more money. They are slowly being understood by the marketplace. Today, a saver is an educated saver. They are comfortable taking the risk," he said.

Kamath said that he has "no sympathies" for organisations complaining of not having enough people.

"To say that you have an HR crunch in a country like India with a vast pool is your own failure," he said. Moreover, he said that the heads of banks in India today may not be techies, but they must be aware of the developments in the technology space.

Kamath also said that owing to easier capital access and a lower ability of banks to lend, India needs more institutions like NabFID.