Reviving investment is key to boost growth: Bimal Jalan

The second issue which is equally important is that then what would you do about making sure that the branches, branch network of foreign banks which are also subject to clearances. In the new financial markets and financial system, globalisation has become important. So, we would have to take a more liberal view there also.

But the fact that banking norms are the same for domestic banks as well as for all other banks operating in our country is a good one.

Q: More generally, is the asset quality of Indian banks worrisome according to you?

A: You see the fact that NPA's are rising means that the economic slowdown is affecting the banking sector, in terms of repayments, bad loans etc. This is a part of the economic slowdown. The central issue is whether it is cyclical or whether is a structural over a long period of time. If it is over a long period of time then obviously you have to recapitalise banks more strongly than we are doing now.

If it is cyclical and say that it would remedy itself. The markets would become much better in terms of our default ratios or NPA ratios to reduce themselves over a period of time then we don’t have to worry too much.

Q: Do you think we are in a protracted slowdown? During your tenure at RBI you saw a near 6-year downturn 1997 to 2002-2003. Is it looking something like the late 90s, could it get as protracted as that?

A: I don’t want to compare this situation with any other situation. All situations are different. It is absolutely clear that the economy is in a slowdown mood. Confidence of investors is very weak and as you can see people are waiting and watching, the expectations are not so good, except consumer goods etc are doing alright, but demand has fallen and something has got to be done.

What needs to be done in the present situation is a larger issue which I don't want to go into right now. But it’s a matter of concern and we have to handle it before it gets out of control. This is the most central point I want to make, that we can’t just slug along as it were.

Q: But does it look like it’s going to be several years affair rather than just a several quarters affair - the slowdown?

A: I would not like to put a time period on it but the fact is that the slide has occurred and has persisted over at least four quarters. The sharp slides may have occured in the last two quarters. But if we go back - everybody was saying, all the policy makers, etc. - that growth will be XYZ which is 1-2 percentage points higher than what it is now, that industry will recover on its own, that we announce policies which we reverse, then we announce policies which we don’t implement.

So, lot of these kind of issues have to be sorted out and I hope they will be sorted out irrespective of whether the economy or view on the outlook is. The current situation needs to be handled and managed in a way so that we can reach, it’s not a cyclical slowdown. I think it’s a question of confidence, expectations and investment which is suffered. We must take care of all these.