Slowdown will last longer than anticipated: Amitabh Chaudhry

The economic slowdown may last longer than anticipated and will get tougher before it gets any better, says Amitabh Chaudhry, CEO, Axis Bank. There is a lot of unpredictability and hurdles in the functioning of government agencies which are creating jitters, he tells Saloni Shukla in an interview. Edited excerpts:What is your assessment of the economic slowdown and what can be done to turn things around?It’s obvious that the Indian economy is stalling. It started with the NBFC and real estate sector and has now impacted the auto sector and the consumption economy.What can change this? On the one side, people say that the government has to do something, that they have to infuse steroids.The government is saying, “my hands are tied as I have to be fiscally responsible.” They want private entrepreneurs to put in money. My worry is that private entrepreneurs don’t have the money. A fatigue has set in. The government is trying to ease norms to bring in foreign equity.How long will this gloom and doom last?I hope this is a cyclical issue because if it’s structural then we will take a long time to come out of it. People don’t know why the auto industry is in the dumps. My worry is this slowdown will last longer than anyone of us have anticipated. People are saying one quarter...I don’t think so. It will get much worse before it gets better.So, what can be done to at least make the negative impact lesser?The biggest thing the government can do is to bring in predictability…as in when you have approvals to undertake a project, can I be sure that I won’t be stopped? New foreign money cannot deal with this unpredictability.Lots of people who are stopping these projects are governments. I was hearing Uday Kotak speak. He said on the settlement side, government agencies are trying to extract as much money as possible. The government owes a lot of money. It can’t sit on other people’s money. It causes working capital and liquidity issues. They need to ensure payments are done in time. This needs to be monitored at the highest level.Are there any opportunities during the economic slowdown?Even if the Indian economy was not growing there are opportunities for us because our market share is not very large. We have deep relationships with our clients on the wholesale side…we haven’t got our fair share.So, I believe we can grow 6-7% above industry average. We have to be more cautious than before. The signs and signals coming in are not positive. New companies are defaulting on a weekly basis; the commentary on some of the retail assets is becoming more negative than before. So, we need to raise our standards on what sort of risks we can take.The market says your bank has turned very conservative. How do you grow?We want to be ahead of the curve in our provisioning policies. We are trying to be more conservative in our risk rating then even the rating agencies. We also intend to provide much faster on our retail loans.We also want to keep a tight leash on who we lend to and who we don’t lend to. Earlier, Axis Bank was known to be taking large exposure, large fees, large transactions. We don’t want to do too many of them. Tomorrow, if there is stress in certain aspects of the economy it’s possible we will be impacted.Is this conservatism purely because what is happening in the economy?No. It’s a permanent change for Axis Bank. We are clear about that. We don’t want to go back to the old ways. History has taught us that just growing faster is not enough. I know market hates negative surprises especially when it comes from the financial sector.You yourself had a negative surprise in store for the Street this quarter. Is this a case of over-promising and not delivering?It’s only the second quarter. The slippages have come from the BB. We have said we will take down things faster than what others might be doing. Could I have kept some of these accounts at a slightly higher rating level? Yes, very easily, because they are rated at a higher level in the market. But, we don’t want to be doing that. We did exactly what we promised to the market but they didn’t like it.We should not be swayed by market reactions. Otherwise, we will not do what we set out to do. We have a legacy book...the economy is not doing well, the names that we didn’t expect to slip have turned into stressed accounts. We have to face the music.There is a fear of investigative agencies across banks and corporate India. Have you come across these concerns in your chat?There is a fatigue which has set in among a few promoters because they feel in some cases these agencies are not dealing fairly. Some of the promoters whom we speak to want to reduce the number of their businesses and like to deleverage.A lot of them are telling us they want to sell off some of their businesses but I don’t think their heart is in it. Let’s also admit at the same time that a lot of promoters have taken advantage of the system and done things which were blatantly wrong. Now, the rules are changing and the government is getting tougher...obviously, no one likes change so the truth is somewhere in between. The cleansing process will cause short-term pain but is good in the long-term.What is your view on the current state of play in the NBFC sector which led to the dislocations in the economy?I believe this crisis will not get solved in a hurry. I don’t think the government and the RBI should save them. Some NBFCs will die. Some NBFCs, if they are smart enough, will just do enough business to survive. Some NBFCs will close books so they will die slowly, and the good ones will go out and raise enough capital to survive in the long run.NBFCs should share more information and become more transparent. But, my worry is if they share too much the market comes and slaps you. This will go on. Look at IL&FS. We have been at it since August last year. DHFL has been at it for quite some time. We keep hearing about a new investor but nothing has happened.

from Economic Times https://ift.tt/2KhRVoD