00:00 Hello and welcome to NDTV Profit. You are watching the special show on Monetary Policy.
00:05 The Reserve Bank of India today kept the repo rate unchanged at 6.5 percent. This was through
00:12 a 5 to 1 voting that happened at the Monetary Policy Committee. The committee also pegged
00:18 the FY25 growth or GDP growth at 7 percent and the CPI for FY25 at 4.5 percent. And joining
00:25 me today is Dinesh Khara who is the chairman of State Bank of India and one of the largest
00:30 bankers in the country. Mr. Khara, thank you very much for joining us on NDTV Profit. My
00:36 first question to you is, sir, what is your assessment of the commentary made by the Governor?
00:42 First of all, thank you very much for having me on your channel. Well, I think as far as
00:51 the policy announcements are concerned, it was more in line with the expectation. Interesting
00:57 thing is that RBI has retained its inflation projection for financial year '24 at 5.40
01:04 percent, more so with the quarter 4 at 5 percent, which was earlier at 5.2 percent. So it's
01:12 a very clear reflection that inflation trajectory is moving downwards. And the other interesting
01:17 part was that the financial year '25 year GDP growth is expected to be around to be
01:25 7 percent. And there is a very strong demand which is seen on the household consumption.
01:31 And the fixed investment climate remained quite bright going to essentially the private
01:40 capex cycle. So these are some of the highlights. And of course, there are some concerns relating
01:44 to system liquidity, but RBI has been very actively managing the liquidity through main
01:51 and fine tuning the repo operation. So I think the Governor is quite cognizant of the ground
01:57 level situation and is ensuring that there should be enough liquidity in the system on
02:04 an ongoing basis, which will certainly lead to a much better situation as far as the interest
02:11 rate market is concerned in the money market. Sir, for a layman, do you think that there's
02:18 a long wait for rate cut now to happen? Earlier it was expected by the end of the year. Now
02:23 it seems that it's been pushed to the middle of next year. Well, I think MPC is very clearly
02:30 focused in terms of ensuring that the inflation should come within 4 percent. But the kind
02:36 of trajectory which you are seeing, there is a possibility that we should actually get
02:41 to see the rate cut maybe in the second quarter of the next financial year or the third quarter.
02:47 This is what my broad expectation is and much of it will depend upon how the economy evolves
02:52 over the period of time. Sir, the Governor made it a point to mention
02:57 that the transmission of rates are yet to take place completely. Why do you think that
03:02 the transmission is so slow to happen? Well, it may differ from bank to bank. Invariably,
03:12 the rate transmission and also the pricing dynamics of the banks will also have some
03:20 kind of a difference because when these banks are lending for various risks, so there would
03:28 be some kind of a risk premium also. So much of it will be the decisions taken by the ALCO
03:34 and the credit committees. So that is one of the reasons why perhaps this may not be
03:41 seen in total. But nevertheless, this is more of an indication which is used for arriving
03:48 at the interest rates. For a consumer, sir, who is looking at borrowing
03:55 from the market or from banks like yours, does he need to wait a little longer for the
04:02 turnaround of the interest rate cycle? How does he look at this entire policy from his
04:09 point of view? And if he is holding a loan, how does he go about changing his loan or
04:16 loan rates? So if you really look at it, when it comes
04:21 to interest rate cycle, it always keeps on changing. So I think much of it is the consumer's
04:27 preference for raising loan and acquiring the asset. And if at all you will look at
04:33 mortgage loan, which has got a longer term, which is generally taken for about 15 to 20
04:39 years and there may be in the total lifetime of the loan, there would be three cycles.
04:46 So I think perhaps timing the market for as well as interest rate is concerned is not
04:51 a good idea. If at all the customers feel the need for acquiring an asset, variation
04:59 will not be really much, but yes, of course, they can take a call depending upon their
05:05 need and accordingly pursue the purpose for which they are intending to raise the loan.
05:12 You mentioned that the transmission depends upon bank to bank and how their committees
05:18 decide of putting across the rates. In your opinion as a banker and you have been seeing
05:24 this across the system, what is the amount of transmission that needs to take place for
05:32 the governor or for the reserve bank to fully say that okay, the transmission has happened?
05:37 Part of it will also be the composition of the liabilities. So there cannot be any one
05:44 size fit answer for this question. But if you were to put in a finger on this,
05:52 okay, will it go up by 25 to 50% depending upon the asset liability mismatch or the system
06:00 as a whole, how do you see this? What is the extent of rate that can go up from now to
06:05 say the second or third quarter of the next financial year?
06:10 I think if at all I will look at our own assessment, we do not have much of elbow room left. A
06:17 small bit of elbow room is certainly there, but we are very cognizant of the fact that
06:21 if at all we have to underwrite the best quality of assets. So we have to be mindful in terms
06:26 of the interest rate which we will charge. Sir, you initially spoke about the liquidity
06:31 issue which is that the system is, there is a crunch of liquidity means there has been
06:38 a lot of operations by Reserve Bank of India through VRRR or VRRR which is coming in based
06:44 on how liquidity is moving. How do you see liquidity moving in the next 12 to 18 months?
06:49 Do you see that tightness to continue? See part of it will also come from the fact
06:55 that how the full budget when it is presented, how will it look like and so it is also a
07:04 function of the cash and bank balances of the GOI with RBI and also around the time
07:13 of the advanced tax in very way there is a system level liquidity issue. So I think there
07:18 are multiple factors. So I think the way RBI has been acting all this while and ensuring
07:24 that there should be adequate liquidity, I think this practice will continue and they
07:29 will certainly ensure that there is adequate liquidity to ensure that the growth ambitions
07:35 of the economy are not constrained. Sir, as a banker do you see deposit rates
07:42 to go up from here on? For the time being my sense is that it has
07:47 already played up whatever deposit interest rates are to go up and if at all inflation
07:52 trajectory is expected to be soft, then I do not think it should go up.
07:58 And what about loans, fresh loans which a consumer may be taking whether for home or
08:03 for personal, do you see that the fresh loans will come at a cost or higher cost from here
08:08 on? I think much of it is depending upon the kind
08:13 of the credit risk premium which banks will be charging, but otherwise the way seems to
08:18 be more or less stable. Sir, how do you look at the entire scenario
08:23 given the kind of liquidity which is there and the kind of cycle which is playing out
08:27 for the companies who are raising funds for either for capex or for the working capital,
08:35 do you see that there is going to be a cost to them going forward?
08:39 No, I do not think so because we are very clearly seeing that, see these costs are not
08:45 going to be very significant change. So much of it depends upon the opportunity which the
08:52 private sector investors are looking at in terms of the returns which they will generate.
08:58 So these costs are not as significant. So I think there is not a deciding factor per
09:02 se as far as the fresh investments are concerned. Fresh investments are a function of the way
09:08 economy evolves, the way the demand pattern is seen. So those are the guiding factors.
09:13 Uncle, have you seen private sector stepping up on capex and have you seen more dispersals
09:22 happening in this regard? Yes, in fact when we looked at our December
09:29 quarter numbers, we have seen that the capacity utilization has improved and even the facilities
09:36 are, the unavailability have come down. So that is and also when it comes to the pipeline,
09:43 we have got decent pipeline with us and a significant portion of that pipeline is coming
09:48 from the private sector. What is the kind of credit growth that you
09:51 see sir for FY25? Well, 25 will be a function of how the economy
09:57 will look like but for the year 24, yes we are quite confident that we should be closing
10:02 at about 14-15% kind of a growth. Sir, at 7% growth which has been pegged by
10:07 the Governor, how do you see credit growth functioning in that sense?
10:14 I think it should be more or less the way it has grown this year.
10:19 Okay. I just also wanted to understand your understanding because the Governor set up
10:24 the entire thing saying that there is a global factor at play. There is domestic, some domestic
10:31 factor factors are also at play there. What is your assessment of how they are going to
10:35 help more from and influence the way the growth is going to happen or the way the inflation
10:45 trajectory is going to happen because there is an election which is coming up, there is
10:50 uncertain rainfall which may come in, there is already two wars and global uncertainty
10:54 because of that which could create an issue. How do you assess this entire situation?
11:01 Well of course, there are many variables and the better part is that Indian economy to
11:06 a greater extent is dependent upon the domestic demand. So I think and also there is adequate
11:14 supply within the economy. So in many respects, economy is not as much dependent upon the
11:20 global situation. So in a way that's a blessing. And of course, there are geopolitical tensions
11:27 which certainly impact the trade position of the global trade. So our share in the global
11:35 trade, how will it really impact? Probably we'll have to wait and watch. So as far as
11:42 but economy to a greater extent is internally focused. I think more or less as far as the
11:49 larger part of the economy is concerned, it should not get much of effect.
11:52 Sir, just to clarify, you said that you expect the rate cycle to reverse by the second or
11:59 third quarter of the next financial year. We are talking about December 2025, right?
12:03 October, December 2025. October, December 2025. Thank you, sir. My
12:09 final question to you is on the FinTech regulation, sir. There's been a lot of talk on that which
12:14 has happened. In fact, in today's RBI conference, a lot of time was spent on that. How do you
12:21 look at the FinTech regulation? Should it be aligned to the regulations which are at
12:26 par with banking institutions or banks and NBFCs?
12:31 See financial sector across the globe is tightly regulated. If at all FinTech wants to get
12:37 into financial sector space, so then they have to be regulated the way the other financial
12:43 sector players are regulated. This is what my sense is and because there are always transmission
12:50 challenges. So that's why all the players in the financial sector and the ecosystem
12:55 should be equally regulated, should be equally tightly regulated.
13:00 Sir, are you in touch with Paytm for transfer of accounts and others?
13:05 I normally don't comment on any specific issues in such matters.
13:12 My only question was because there's a systemic thing which has been talked about that the
13:15 transfer is going to happen. So is it going to be smooth and are you in touch with them?
13:19 That's the reason I asked you. I have already made a mention that we are
13:22 willing to offer our services to the merchants who are dealing with Paytm. We would be more
13:28 than happy to offer them the payment system services and that remains our stance.
13:34 Mr. Khara, it was a pleasure talking to you today. Thank you very much for joining us
13:37 on NDTV Profit. Thank you. Thank you very much.
13:40 Thank you.
13:41 Thank you.
13:42 (dramatic music)
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