Do you see concerns for the economy amid the various challenges that currently exist?

Given the situation, things are looking rather okay. GST is Rs 1.4 trillion, inflation is coming down and is now at around 7 per cent, exports are growing despite what is happening across the globe. I think these are some of the positives that I see in the economy. And, if you really ask me, the major challenge is essentially on account of fuel price because of the geopolitical disturbance. I think these indicators very clearly reflect that if at all fuel gets tamed, the economy has got the potential to once again grow well. Nevertheless, we are growing at 7 per cent or 7.5 per cent already. I think if we look at the major economies across the globe, perhaps economies of this size, we seem to be doing well. And even on the currency, which is another cause of concern, it was holding pretty well when compared to the dollar index which was firming up. Many other currencies have weakened quite a lot. We are hopeful that by the third quarter, things should start looking even better.

Rupee is hovering around 80 against the dollar. Do you think RBI should intervene? Also, will recent measures to boost inflows help?

I think that it (intervention) really doesn’t work. As compared to that, I would say that, if the balance of trade is in our favour, that will perhaps work better. So, artificial intervention does not really have any long-term impact, it can only be a temporary impact. Already a lot of our forex reserves have been gone. From about $600 billion-plus, we are now at $580 billion.

FCNR (deposit scheme) is a very rate-sensitive product. And, we are observing that in different markets, interest rates are on the upswing. But, normally, it happens that when it comes to the NRE rupee, normally the flows go up whenever the rupee weakens. And it’s a repatriable account also. The kind of reliefs which the RBI has given, perhaps it is essentially for FCNR (B) scheme. We also increased the rate of interest on July 10. It’s too early to really gauge what the likely impact is. We have to wait and watch.

How do you see inflation to be? How big is the worry on account of Russia-Ukraine war?

The way it has moved, from 7.9 per cent, inflation has already come down to 7 per cent and maybe towards the end of the third quarter or in the early fourth quarter we should be having 5 per cent inflation and the excess liquidity in the system has also come down. The global crude price and the supply chain disruptions, which happened during Covid, are getting addressed in due course.

Even as the war poses risk, there are a couple of things. One, of course, is that it’s a US Federal Reserve-induced recession in the US. Also, I think, China is still not on the growth path. These two factors will have an impact on global food prices and would keep crude prices in check.

How do you see the credit offtake?

We have not seen demand tapering off and the retail engine has been growing at about 14-15 per cent CAGR for almost four years. We expect to see a similar kind of growth. The corporate performance has also started improving from last quarter ended March 2022. There may be a slight blip here and there but, overall, I expect even the corporate book should be growing. Our international group last year grew almost about 15 per cent. We expect similar growth in the international book. As far as we’re concerned, we have ample room in terms of availability to support credit growth. Of course, at the system level, deposit growth is lower than credit growth.

What is driving credit growth? Which sectors are expected to drive credit demand?

Part of the credit growth is due to the working capital because the capacity utilisation has improved to 75 per cent for the economy from 69 per cent or so. The supply chain disruptions, when they get addressed, lead to improvement in capacity utilisation. Contact-heavy sectors such as tourism and aviation, which actually suffered, seem to be coming back.

Renewable energy has a huge potential. PLI, of course, is the other area of interest. Then, the focus on the infrastructure in terms of new airports that are coming up and the new ports that have been sanctioned. Infrastructure per se, including roads, is one of the major areas of growth.

Given the inflation levels, do you see further rate hikes by the RBI?

I think those decisions will depend upon multiple variables, which they evaluate when the MPC meets. I think it’s difficult to really second-guess right now.

While there are concerns around inflation, growth and rupee, how are international investors looking at India?

They’re all looking at India with a lot of interest. But, yes, perhaps they will wait and watch because many of them particularly, when it comes to FDI, invariably come with a very long-term perspective. Some of the long-only investors, they look at the country with a lot of interest for the simple reason of the political stability and also the way a country has got accepted globally in the recent past. I think that these are some of the reassuring factors which these investors look at.

How is the situation on bad loans?

I won’t say stress but yes, volatility is seen in metals. We’ll have to wait and watch because of the global raw material issue. I think, overall the picture seems better. But the sub-segments, of course, are very different. When it comes to SMEs, there could be some (slippages). Overall, I don’t expect the picture to be bad. And in any case, whatever was the likely stress for the restructured accounts, we had done the provisioning to insulate the balance sheet from the future shock. So that will also give us comfort but nevertheless, in SME, wherever the cash flow disruptions have not got repaired, there could be some stress. But I think we have already adequately taken care of it. Retail segment is generally okay.

Do you see a concern on NPA across segments?

I don’t expect much… On corporates also, we don’t have any challenges and we were doing aggressive provisioning. Similarly, the SME stress book also we have taken care of. We run a book of almost Rs 28 trillion. So small things here and there will happen. That’s a function of the economy.

In ECLGS kind of a book also, aggressive provisioning is done. Our overall provisioning was about Rs 7,000 crore. Our ECLGS book was about Rs 20,000 crore. In the Rs 20,000 crore, about 50 per cent was in retail, which has home loans and sector mortgages and another 50 per cent was in the SME sector.  When it comes to a home loan mortgage book, almost 75 per cent is that of the first-time home loan borrowers. So, it is not an investment demand, it is more of a necessity. And they are also very mindful of the fact that if at all they default, then their credit score takes a hit.

Don’t you think there has been a slow off-take of bad bank?

We’ve got all the approvals, and even non-binding bids have been given by them. And now, the point is that it is a process. The resolution of the stressed assets is always a process. After the non-binding bids are given, each bank will evaluate, and then they will come back. It’s a process that has to be carried out. They’re already doing it. And I think they have accounts which have already been transferred to them. They’re in the process of certifying their valuation — the floor price valuation — so that they can go for offering the non-binding bids to the participants. I think they’ve already started working. Maybe soon we’ll see the results. Around Rs 50,000-crore accounts have been transferred in the first tranche.

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How do you see tightening of regulations on NBFCs?

They are now becoming critical overall. NBFCs are the last mile connect. So, of course, for bringing in discipline in the sector, it is very essential that all the sub-segments of the sector should be well regulated. By the way, there is arbitrage, regulatory arbitrage.

How do you see growth of fintechs and do they pose a threat to banks?

No way. Banking is not merely taking deposits and offering remittance services. Banking is a more complex subject and the basis of lending also involves a lot of decision making. I think they are only offering solutions which can be consumed by the banks. So, eventually expecting that they will take the space of the bank is impossible. They are not subject to regulation, first of all. The financial sector across the globe is a very tightly regulated sector because eventually it works on the money of others. I’m only saying that it’s (Fintech) a very different activity. There can be an opportunity for collaboration. They perhaps cannot substitute banks.