CRR hike may be unwarranted in mid-policy review: ICICI Bk

In an exclusive interview with CNBC-TV18's Executive Editor Shereen Bhan, Kochhar spoke about the current liquidity scenario in the Indian banking system and ICICI Bank's integration process with Bank of Rajasthan.

Below is a verbatim transcript of the interview. Also watch the accompanying video.

Q: How is the current liquidity scenario looking in the Indian banking system?

A: As far as the CRR is concerned one has to look at the liquidity situation. I would only say that the days of excess liquidity are behind us now. We are no longer living in that very excess liquidity situation.

Q: So you are saying that a CRR hike would perhaps be unwarranted at this point?

A: I would think so because I think liquidity is actually important for growth to continue.

Q: And what is the liquidity situation because we have seen it very tight on account of the 3G auction and so on and so forth. Has it stabilized back to normal what is the situation?

A: I won't say that it’s very tight but there were days three, four months ago where there was just excess liquidity. I would say that it got utilized for a shorter period on account of 3G and so on. But as that money starts coming back into the system, because I think it would, as the government's spending starts, but then you would by then see credit growth pick up much faster than what we have seen in the last four or five months. So that liquidity will really go towards the credit growth for projects, infrastructure and so on.

So that's why you will have to work on this very thin balance between managing the right amount of liquidity. So that's where we are. I wouldn't say there is any panic at all. But I would also say that, it is just that excess liquidity that was lying is no longer kind of just lying around. It is really being put to use.

Q: We have just seen you actually hike your BPLR by about 50 basis points. What can we expect in terms of base rate revision from you?

A: As of now there's nothing immediate on the cards. But I think in terms of general movement of interest rates I would think that the second half would see some amount of increase in lending rates because one has already seen an increase in deposit rates.

Q: This is the first time we are speaking to you since the Bank of Rajasthan merger got the RBI's approval. Where does the integration process lie? Where are things on in terms of sorting out issues with the employee unions? Are you looking at VRS, perhaps not looking at a VRS this point in time, what's happening with Bank of Rajasthan?

A: The integration process has commenced very well and we have an integration committee which has good representation both from the ICICI Bank employees and ex-Bank of Rajasthan employees. The committee decides on how to move on every aspect whether it is technology, whether it's the look and feel of the branches, whether it's the employee integration and so on. So everything really is now a joint decision and that's how we are implementing it.

Q: VRS on the cards? Not a possibility.

A: No, not all. We have said that there is going to be no retrenchment, no uncalled for transfers that we are kind of protecting the people's existing wage structures, their pension requirements and so on. So no such surprises on the cards.

Q: Are you at all worried about the fact that we have seen a significant number of high profile exits. Mr. Kamath said it is not keeping him up at night, is it keeping you up at night because you are sort of in the managerial seat at this point?

A: I feel very proud of the fact that ICICI has such a depth of talent and is able to give opportunities to its people to develop as talent resources.

Q: But does it, I am using a strong word, hurt you, the fact that it has sort of become a more personalized conversation when it involves the exits out of ICICI?

A: I think it’s an unfair correlation and the media is probably responsible for that. But the way I look at it very dispassionately is that you look at the past 20 years and look at the kind of leaders that ICICI has contributed. Whether you want to look at a person like Kishor Chaukar who is currently in the Tata Group or you look at some people who actually retired from ICICI and are running businesses outside. Or you look at some of the CEO's of the current private sector banks who have been with ICICI in the past. So I think you have to look at the last 20 years history and see how ICICI has been a talent farm.