Interview with KV Kamath
ICICI Bank Chief Executive Officer K V Kamath says high borrowing costs and a slowing economy are denting demand for loans. But there is more scope to ease liquidity and help banks cut interest rates, he adds. Excerpts from his remarks at a press conference held in New Delhi on the concluding day of the India Economic Summit of the World Economic Forum.
When would we see banks bring down interest rates?
Interest rates or any other rates are subject to supply and demand. In the supply context, which is liquidity, banks would like to see enough of it in the system before they are able to reprice credit. So, first you have to ensure that borrowings are repriced and then lending repricing will follow. It could happen in a few days or a few weeks. Steps are being taken and intentions are very clear. I am the first to say there's a need for price cut in this market.
Do you expect further monetary action by the government?
Yes. There is more scope for more action on the monetary front and they are prepared to take it. A few days ago, the Prime Minister said we are in a 24x7 readiness mode and for me, that is answer enough. Steps have been taken and more steps will be taken. The action would be determined by how the global situation unfolds. For instance, if systemic liquidity is not comfortable, it needs to be eased. Or if interest rates are still at uncomfortable levels, they need to be lowered. I am sure there is a preparedness to act on all these issues. There is further scope for a 2.5 per centage point cut in the CRR itself and, if the situation warrants, a cut in the SLR too. The financial slowdown has brought a sudden loss of confidence and it needs to be restored with the right policy decisions very soon.
Is there enough liquidity in the system?
Unlike most global market places, India is blessed. It has a more liquid system than most others. But, it is entirely a policy decision to use it to bring down interest rates or otherwise.
How soon do you see the business confidence level rising?
This is a serious challenge before the nation. The sudden loss of confidence happened due to the sudden global products' price shifts that happened. For instance, in crude oil and commodity prices. Customers are not picking up their stocks, waiting for prices to settle. Demand has to come back. In India, demand for most products would come back to 85-90 per cent of what was it earlier, as we are a country still growing at about 7 per cent.
What is your outlook for next year?
There is a large pipeline of investments. This is going to provide a boost to the economy. We are not starting from a zero base. There is a healthy investment pipeline that is going along. Once all this pans out, you will find that getting back to 8 per cent (annual GDP growth) will not be so difficult.
How do you see ICICI Bank's growth in the year?
Instead of growing at 30 per cent, the target rate we had set two to three years ago, we will now probably grow domestically and globally at around 15 per cent. The domestic growth cycle has slowed down and domestic interest rates are high. Lending rates must fall by another 3 percentage points to ignite a rebound in loan demand.
What about acquisitions?
In this market, looking at valuations is going to be tough as you are not sure of what is happening in other countries. Probably you are better off conserving your own capital than making an acquisition.
Source: Business-standard 19/Nov/2008
When would we see banks bring down interest rates?
Interest rates or any other rates are subject to supply and demand. In the supply context, which is liquidity, banks would like to see enough of it in the system before they are able to reprice credit. So, first you have to ensure that borrowings are repriced and then lending repricing will follow. It could happen in a few days or a few weeks. Steps are being taken and intentions are very clear. I am the first to say there's a need for price cut in this market.
Do you expect further monetary action by the government?
Yes. There is more scope for more action on the monetary front and they are prepared to take it. A few days ago, the Prime Minister said we are in a 24x7 readiness mode and for me, that is answer enough. Steps have been taken and more steps will be taken. The action would be determined by how the global situation unfolds. For instance, if systemic liquidity is not comfortable, it needs to be eased. Or if interest rates are still at uncomfortable levels, they need to be lowered. I am sure there is a preparedness to act on all these issues. There is further scope for a 2.5 per centage point cut in the CRR itself and, if the situation warrants, a cut in the SLR too. The financial slowdown has brought a sudden loss of confidence and it needs to be restored with the right policy decisions very soon.
Is there enough liquidity in the system?
Unlike most global market places, India is blessed. It has a more liquid system than most others. But, it is entirely a policy decision to use it to bring down interest rates or otherwise.
How soon do you see the business confidence level rising?
This is a serious challenge before the nation. The sudden loss of confidence happened due to the sudden global products' price shifts that happened. For instance, in crude oil and commodity prices. Customers are not picking up their stocks, waiting for prices to settle. Demand has to come back. In India, demand for most products would come back to 85-90 per cent of what was it earlier, as we are a country still growing at about 7 per cent.
What is your outlook for next year?
There is a large pipeline of investments. This is going to provide a boost to the economy. We are not starting from a zero base. There is a healthy investment pipeline that is going along. Once all this pans out, you will find that getting back to 8 per cent (annual GDP growth) will not be so difficult.
How do you see ICICI Bank's growth in the year?
Instead of growing at 30 per cent, the target rate we had set two to three years ago, we will now probably grow domestically and globally at around 15 per cent. The domestic growth cycle has slowed down and domestic interest rates are high. Lending rates must fall by another 3 percentage points to ignite a rebound in loan demand.
What about acquisitions?
In this market, looking at valuations is going to be tough as you are not sure of what is happening in other countries. Probably you are better off conserving your own capital than making an acquisition.
Source: Business-standard 19/Nov/2008