Indian  banks  will  grow  at up to  15%:  K.V. Kamath

On Tuesday, the World Bank’s Global Economic Prospects report warned of a global recession this year, adding a sharp and long-lasting slowdown is expected to hit developing countries hard due to elevated inflation, abrupt interest rate spikes, the resurgence of the covid-19 pandemic, reduced investment, and geopolitical tensions caused by Russia’s war in Ukraine.

Speaking at an interaction at Mint’s 15th Annual Banking Conclave, Kamath sounded bullish on the prospects of the Indian banking system, predominantly on the back of the fast-growing digitalization of financial services.

“Banks have improved both in terms of capital base and the quality of the book. Growth rates (in banking) mimic GDP growth and may be 20% higher. Deposit growth will be fairly adequate to meet credit growth, which should be around the same number—10-15% this year, depending, of course, on the bank,” Kamath said.

Kamath said that in today’s environment, saving products, such as mutual funds, are also gaining wide recognition, but eventually, that money comes back to the market either as equity or as debt products to support the industry.

He said there would be double-digit growth in deposits and, therefore, it is an unnecessary fear that low deposit growth in banking will impact the financing for industrial growth.

“Double-digit growth is good growth,” Kamath said.

Kamath, talking about preparing Jio Financial Services, where he is the non-executive chairman, said he is counting on the opportunity that can be leveraged from the fast-emerging digital landscape in India’s financial services sector.

“Building something from its foundation is very interesting. Whatever good can be done for the growth of the country, I will do that. So, I thought this (Jio Financial Services) was a great platform to work with to deal with what is particularly the future of financial services for a country like India. There are very interesting opportunities on the horizon when we talk about the digital future of this country in terms of financial services. Entire digital opportunity can be leveraged through this platform,” said Kamath.

Kamath, however, did not elaborate much on the timeline for launching Jio’s financial services and its areas of operation.

Jio Financial Services, with an authorized capital of at least ₹1 trillion, is expected to be well-funded for fast expansion, especially because of the vast captive customer base of RIL and its retail subsidiaries.

“It’s premature to talk about that. But I would think that entire digital opportunities will be leveraged by this company, in terms of financial services products, and we can see this for sure,” he said.

Currently, Reliance Industries is in the process of demerging the financial services business and housing it under a holding company structure.

According to Kamath, consumers currently need simple products that provide the required safety and the highest possible returns.

Against the backdrop of instances of fraud in the banking system, Kamath said integrity is a key factor that every bank as an institution, its board and the regulator have to be conscious of.

Regulators in India have come down heavily on matters that would jeopardize the trust or the savings of customers.

“Given the fact that the customer relies on the trust that has been built either by the institution, its people or by the regulator, there is no sign of wavering in the customer’s trust in the banking system yet,” Kamath said.

“We have a regulator who is very much on top of what is happening virtually on a day-to-day basis, if not on a real-time basis. I think it is going to go into a real-time basis very soon because everything will be detected in real-time. So, the customer’s trust is safe,” Kamath said.

Kamath, who also happens to be chairman of the National Bank for Financing Infrastructure and Development (NBFID), said the dedicated infrastructure lending institution disbursed its first loan last week.

NBFID is the principal development financial institution (DFI) for providing long-term finance for infrastructure and such segments of the economy where the risks involved are beyond the acceptable limits of commercial banks and other ordinary financial institutions. Unlike banks, DFIs do not accept deposits from people. They source funds from the market, government, as well as multilateral institutions and are often supported through government guarantees.

NBFID began operations last year with an initial capital of ₹20,000 crore infused by the government.