Deposit growth is inching up and is in the double digits, but it remains tough, private sector lender Axis Bank CEO Amitabh Chaudhry told Moneycontrol in an interview at the World Economic Forum happening in Davos.
“It is tough on the ground. You have to fight for the deposits,” he said, adding that the efforts of the Reserve Bank of India and the government are helping to shore up the deposit growth, will help sustain the healthy credit growth.
“RBI confirming and repeatedly assuring everyone that they will bring about a durable liquidity in the market, and the government hopefully starts funding again, you will see deposit growth inching up slowly from here. It could take some time, but my hope is it has to inch up,” Chaudhry said.
However, he warned that if the deposit growth does not grow as expected, it will have an impact on the credit growth and could ultimately start impacting the economic growth.
Consolidation and foreign investment
The Indian banking sector has attracted interest from overseas financial institutions over the last year and could help in the consolidation of the industry.
“That also brings stability and kind of a lot of growth capital to some of these banks. The government is also talking about merging some of the larger public sector banks to create the bigger banks,” Chaudhry said.
Improving asset quality could also facilitate the growth of the industry, and the retail asset quality improves dramatically as banks strengthen their underwriting.
Expectation from the budget
Chaudhry also expects the union budget to move towards fiscal consolidation even as they spur the capital expenditure cycle.
Some support needs to be provided to the MSMEs who have lost out in this whole tariff cycle.
“The fundamental question is what they are doing in pushing Research & Development, pushing startup ventures. Can they do much more than what is being done at this stage? We are definitely falling behind to some extent,” Chaudhry said.
He pointed out that India should not fall into the middle-income trap.
“We need global patents, global brands coming out of India. And at the pace at which it is happening today, I might not be sufficient. So we need to do more,” he added.
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