 "K V Kamath")
Don’t fret so much about the issue of bad loans at Indian banks, says veteran banker K V Kamath.
The issue has been overblown and the processes of economic growth and asset resolution will take care of the challenge, said the former chairman of ICICI Bank and now head of the Shanghai-headquartered multilateral New Development Bank (NDB), set up by the BRICS bloc of nations.
China about 13 years earlier, said Kamath, had non-performing assets (NPAs) of $500 billion, about half the size of its Gross Domestic Product (GDP). India’s NPAs were then only five to 10 per cent of GDP, the same proportion as of now.
“I do not know what is the noise about (NPAs). We have to work on solutions,” he said at a media interaction event on India-China relations, organised by the Confederation of Indian Industry here.
Where the assets are non-productive, these should be written off. The quicker the better; cleaning up should not frighten us. The aim should be to look at solutions, he counselled.
He parried question on how public sector banks (PSBs) should address these problems. Last month, global rating agency Moody’s had cautioned that a prolonged worsening in asset quality at PSBs was the main threat to India's sovereign credit profile. It made a case for the government bearing some of the cost of cleaning bank balance sheets.
“The main threat to the sovereign credit profile would be via a significant and prolonged worsening in asset quality at state-owned banks, beyond the recognition of bad loans currently under way, that causes contingent liabilities to crystallise on the government’s balance sheet,” it had said.
Last week, Kamath’s NDB chose his former organisation, ICICI, for its first tie-up with any bank in India, to explore opportunities around bond issuance, co-financing, treasury management and human resources.
