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BS Banking Round Table: Liquidity-flush banks ready to fund growth

With economy promising to turn around with a pro-reforms government at the centre, leading bankers said they were ready to fund growth though new project investments could take another 12 months.

On a day the central bank maintained status quo on interest rates, the bankers, who were 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 has significantly come down since 2011. “Just two months back, we saw that the number of non-infra projects is down to three from 17. So it is more a question of getting projects off the ground than financing,” Bhattacharya said.

In this context, bankers saw the initiatives from the government — be it pushing stalled projects or 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 though through. We are seeing all the right signals,” said Axis Bank CEO & MD Shikha Sharma.

The recent surge in capital flows into India has also made bankers optimistic about growth momentum 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 CEO Ravneet Gill.

Bankers, however, said there was a need to improve credit discipline of the Indian corporate sector and stricter laws that existed in developed countries. Banks have been seeing a surge in non-performing assets over the last few years.

“We need something on the lines of a chapter 11 (of the US) here. If a project becomes unviable or if it takes a hit, then 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 MD Aditya Puri.

The government is planning to amend the Financial Assets and Enforcement of Security Interest Act (SARFAESI) during the ongoing winter session of the Parliament to effectively deal with the issue of bad loans, especially those being created by suspected wilful defaults.

On the constraints banks face, Citi India CEO Pramit Zhaveri said there was an urgent need to look at the priority sector lending regime that foreign banks faced in India.

On his part, C S Ghosh, chairman and managing director of Bandhan which has got in-principle approval to set up a bank, said the challenge was two-fold: training of its 14,000 employees to become a banker and proving to the world that “we can become a bank”.

ALSO READ: Key quotes from top bankers at BS Banking Round Table

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