You have said that business at HDFC Bank is back to pre-Covid levels. How quickly do we get back to normal?
When Covid hit us, people didn’t know the magnitude of the problem; so everybody panicked. We saw all kinds of projections… that mankind was going to hell, banks will have to shut shop, 70% moratorium means 70% NPAs etc. Since unlock has started, we are seeing recovery. Someone is at 75%, somebody is at 85% and 90% across large sections of the economy. I am not saying that the problem is solved for everyone but we are recovering. We have to understand the need to create a positive sentiment and should not tilt only to one side. Being despondent is not going to help anyone. Also, let’s be very clear that the government alone can’t do it. Look at the automobile players “woh kitna roya” (they cried so much), where did they get these sales numbers from? This is not to say that the airline, hotels industry, bottom of the pyramid, and the unorganised sector are not suffering.
Is this pandemic creating a wider gap between the haves and the have-nots?
The pandemic has been harsher on the have-nots. The government has tried its best but it has several constraints. I think geo-economics and geo-politics will change substantially in the aftermath of the pandemic. We must also realise that the hype we created about global trade has not been a complete success. The richer countries are becoming richer and the poor countries are finding it more and more difficult. Are we going to see less global trade and more protectionism? Are we going to see more strident politics? The answer is yes. No system and economy can survive with having too many have-nots and we need to be careful with that.
Even before the pandemic, growth was slowing in India. Why did that happen and what could be done?
There was a slowdown in government expenditure in terms of capital formation and the world also slowed down. Ruchir Sharma says the world has to adjust to slower rates of growth. We need to have clear strategies to increase exports, we need to have clear strategies for where 60% of India lives; those people need to have more affluence. We need to compete on the digitisation front and we need to have immense focus on developing our infrastructure. Hopefully, we will use the pandemic to streamline all issues with GST. The reforms were required, the ideas were good but the implementation needs little more work.
Ruchir believes that India can’t grow more than 5%. What’s your opinion?
I have quite the opposite view and we are on two ends of the spectrum. I disagree with him completely. If India grows at 5%, then the rest of the world will grow at 2 to 3%. If India does everything right we will reach 8 to 9%; so what is the probability of us doing everything right? Even if we get 60% right, we should get 7-7.5% growth. If we get semi-urban and rural India growing, if we get the right infrastructure spending, if we have the government spend on productive resources and are able to attract manufacturing into India, we can grow 7-9%. This will take two-three years of extensive execution of items that have already been identified.
What’s your take on the leadership projection of your successor Sashidhar Jagdishan, who has kept a low profile?
When you have Thayir Sadam (curd rice), you have Mirchi (chilly) on the side. Sometimes, that mirchi is big, sometimes it’s small. But even the small Mirchi can feel like an iron fist in a silken glove. Don’t underestimate Sashi. He may not have the Punjabi bluster, but Thayir Sadam along with mirchi is an equally deadly combination. Everybody does not have to be in-your-face aggressive. You can be aggressive in a far more sophisticated manner. The belief that the chief executive is the sole person responsible for the results is wrong. Today, your business is done at the ground level; the chief executive is the first among equals. Sashi has a very strong second line.
Over the past 25 years, you may have got calls from politicians and industrialists seeking favours. How have you dealt with that?
If you don’t ask them for a favour, they don’t call you. The problem half the time is you ask for favours but when you have to return, you face problems. If you are going to ask for something out of the ordinary, you have to be prepared to do something out of the ordinary. I know a lot of politicians and bureaucrats and some of them are good friends: Not once have we discussed something out of line. The only times I did get references from politicians, they were to be treated on merit. I said no, but never faced any resistance. And if it was a good proposal, I did it.
The central bank is taking a relook at the rules governing bank licences. Should industrial houses run banks?
Ownership and running of banks… as long as it is run as a separate company, it is run professionally… you give it to the right group. Just like there are good and bad banks, there are industrial groups that are known for their ethics. There is room for a lot more and all types of banks, universal, small finance etc. I would say industrial houses with good ethics should be allowed. With artificial intelligence, with the ability to have offsite inspection, if you put in tight regulatory checks and balances I don’t think that over concentration to same group lending is a possibility. If you look at all the banks that faced problems, for how many years the market was right about their issues before they were caught by their necks?
What next for you? There is buzz that you may join the RIL board?
There is no truth to it.
How would you describe your journey which, measured by conventional performance yardsticks, is nothing short of phenomenal?
When we came and started, people were laughing at us. We had all left cushy jobs. I used to be in a duplex in Malabar Hill (tony South Mumbai zone) and came to live in a small flat in Bandra (the western suburbs). From driving a Mercedes, I came to drive a Maruti — at half the salary. The one thing we had was a belief that we could make this happen and so a whole lot of us came together. I still remember one of the best days was when we won an award for the first time, after which we had a conference at the bank and everyone was like “boss we made it”.
It’s not my journey alone; it’s the journey of one lakh people who have built the bank along with us. Everybody has to move forward; it’s the footsteps that you leave behind. If people can talk about you with love and respect and they can be proud about what you jointly achieved, I think that’s the biggest prize you can get. I would be lying if I would say I ever thought the bank would become so big. But after 3-4 years, we all thought we could do it. I have to say the biggest credit for the first two years goes to my wife. I couldn’t show the bank people I was having doubts so the brunt of the tension was borne by my wife. ‘Shaam ko aakar kidhar rota tha, uske pass hi rota tha’. She would say complaining will not solve this; now the problem is at your door you make a success out of it.
What is your view on the apex court hearing on the interest moratorium?
I am very confused with the whole case. Whether it’s lack of coordination or judicial overreach. I am running a commercial organisation in this country. I have entered into a commercial contract with a company. You have to honour my contract. They can have their discussions with the government but you need to remember that I have a commercial contract in a democratic country. And if you don’t pay me interest, how do I pay depositors? If somebody says don’t pay the interest, then you have to compensate me. This is not the best situation for credit discipline. Why did I release proforma NPAs, because I didn’t want to give a misleading picture just because you tell me not to declare NPAs. I have to give the shareholders the correct picture; if a company is an NPA, I have to say that.
There is some criticism that the government is not spending enough…
Just because you put money in someone’s pocket doesn’t mean he will spend. You have to feel secure about your future. If people are saying spending hasn’t happened, they should look at MSMEs where almost 2.5 lakh crore of loans have been disbursed. Through this lending, jobs will be created which will create demand. The government has spent a lot of money in semi-urban and rural India; that is why you have demand there. Can there be more spending? Yes, but the government is facing issues on the revenue side. It has said it does not want to exhaust all ammunition in one go. With states borrowing more, I expect more infrastructure demand. Just beating up the government is not the solution. Corporate tax was cut by 25%, did anyone pass on the benefit? ‘Hazam kar diya sab’. If government cut rates on GST do you think that will be passed on? Many people cry hoarse but a clear mechanism is required, instead of passing on freebies investment has to be made in infrastructure.
Non-bank lenders have a constant grouse that they are starved of funding from the banking system. Why this risk aversion?
Do you think I am in the banking business to have deposits lying idle? Or am I in the business to lend? But will I lend to somebody who I am not sure will give me my money back? I would advise that these firms have to run properly and banks should not be blamed for it. My job is not to lend to unworthy credit. There is a difference between risk management and risk aversion. There is no risk aversion in the system. If the finance companies went overboard with their growth, they had NPAs, they mismanaged their ALMs and consequently they ran into difficulty; I would say you solve your problem. HDB, which is our NBFC, has no problem in getting money.
Industry associations say the government needs to give a push…
We have to stop this syndrome that if we cry, the government will give us concessions. You don’t need government concessions. There is enough demand; so work on your efficiency. I was at a function where some government officials were also present; they asked me what do you want from the Centre? I said nothing; (just) let me function. If I need anything, I will come to you. There is tremendous latent demand in the system.
The bankruptcy law is blamed for a lot of Corporate India’s ills. Does it need amendments?
The problem is execution. Do we need a bankruptcy law that functions like Chapter 11 in the US? Absolutely. We need to make more progress where its working should be very simple. If a firm is going through difficulties, you systematically look at what part of the business is saleable. But there are complex issues here — five to six people are suing that delays the process. Since the majority of the banks have more than 70% provision coverage, we should have a systematic solution to the bad-loan problems.