Search
+

    Low interest rate regime critical for survival of banks: KV Kamath

    Synopsis

    KV Kamath has pitched for a low interest regime, saying it is critical for survival of banks at this juncture.

    Agencies
    Praising the decision of the RBI for extending moratorium to borrowers till August, Kamath said it was very well done.
    Coronavirus

    COVID-19 CASES

    Confirmed
    1,908,254
    Deaths
    39,795
    NEW DELHI: Banker and former president of New Development Bank KV Kamath on Tuesday pitched for a low interest regime, saying it is critical for survival of banks at this juncture. In view of the current economic slowdown induced by the coronavirus outbreak and subsequent lockdowns, Kamath's advice for lenders is considerable as banks are staring at a surge in non-performing assets (NPAs).

    "I think the banking sector was having a problem, but I think the banking sector with all the efforts of the government, the capital that was injected and so on was coming out of the problems. It needs a little more hand-holding when it was coming out of the challenges," he said in an interview to a news channel.

    The career banker said that the pick-up in growth is important for improving the health of the banking sector.

    "...with the steps that have been taken, the growth will happen whether it is in the corporate India, whether it is in rural India or whether it is in retail India, I think we need to maintain momentum of growth," he said.

    "Second is at this point in time low interest rates. Lower interest rates are going to be critical for survival of banks... I would guess that interest rates need to drop even further if the banks have to come around without too much pain. Otherwise they will probably come around but (with) extreme pain and money being provided by various stakeholders," he said.

    Kamath said "capital injection will be required, but the order of capital injection will be significantly lower than what it is, if you run the high interest rates regime. So I think banks really need to look at how they work with the government, with the regulator to ensure that low interest rate climate endures".

    Praising the decision of the RBI for extending moratorium to borrowers till August, Kamath said it was very well done.

    "I am even more heartened when I see bankers come out and say or some NBFCs come out and say that 'X' per cent of my customers took the moratorium, that was 2 months back, but today remaining of them have said that we will pay in time; extremely good news. So, I would think and hope that continues," he said.

    However, if there are sectors which genuinely have a problem, policymakers could consider one-time restructuring, he added.

    On India's potential to become an alternative for manufacturing companies looking beyond China, Kamath said if the country further improves on certain parameters including on 'ease of doing business', the Indian industry can emerge as a "world beater".
    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

    Also Read

    7 Comments on this Story

    Deepak Bhatia27 days ago
    Present Governor idea to reduce interest people will buy property how many flats sold so far untilunless Gst and stamp duty will not reduce this economey will not run 100% chalaging Government should watch world property how discount giving this not a solutions to reduce every 20 days loan it will effect economey person will get good punt he will buy things and government will get revenue for limited time give those waiting to buy house discount on stamp duty and Gst for one year open market see the change
    Subbu India28 days ago
    Low interest rate is survival for banks but death knell to Senior Citizens who do not get any pension.
    Joginder Pal Gajree28 days ago
    MR. KAMATH MAY ALSO PONDER HOW MANY BAD LOANS ARE CREATED BY THE BANKERS KNOWINGLY.LOW INTEREST RATES TO SHADY BUSINESS MEN ONLY IMPOVERISHES THE HONEST WORKERS AND TAX PAYERS -THE DAY IS NOT FAR AWAY WHEN THERE WOULD BE CALLS TO GIVE LANOUR AND MONEY FREE TO CREATE GROWTH-TO WHAT PURPOSE?
    The Economic Times