The hysteria surrounding bad debts of banks is unwanted as the country's banking system is robust profitable enough to absorb losses emanating from bad loan accounts, a top HDFC Bank official said here.
"We don't need any hysteria on NPAs (non-performing assets). While it is okay to raise concern on growing NPAs, we must realize that the Indian banks are well capitalized unlike the failed banking system of developed nations. The banking industry is growing year-on-year at the rate of 17-20% with healthy balance sheets”, Aditya Puri, managing director, HDFC Bank said at the 3rd National Finance Conclave-2012 held at the city-based KIIT School of Management.
While the world economy has been battered by the financial meltdown, our banking system has bypassed the financial tsunami, he said.
Rising NPAs of banks, especially that of public sector lenders was a cause of concern that had raised questions on the asset quality of banks. During 2011-12, gross NPAs of publoc sector banks, accounting for around 80% of total credit, grew by Rs 39,000 crore compared to only Rs 500 crore in the case of private banks.
Meanwhile, the medium to long-term outlook for India is good, Puri said.
"I don't say there are no problems but 50% of out GDP (gross domestic product) is driven by domestic consumption. Our dependence on exports is low. We also have high savings rate and a young population”, he said.
Puri, however, stressed on the need for revamping subsidy mechanism.
"Subsidies that do not reach the actual beneficiaries is bad economics. What the country needs is targeted subsidies. Gradually, the subsidies have to be pruned to rein in fiscal deficit which cannot be contained by divestment alone”, Puri asserted.
He also called for encouraging micro finance to enable credit penetration to the bottom of the pyramid.
"HDFC Bank has now set up an extensive infrastructure for micro finance. We also want to take financial services to interior regions through participation of telecom companies”, Puri said.
