“Yes, this is an issue because you rightly mentioned that there are alternates available in terms of mutual funds and equity markets, where a lot of money from the retail depositors is going because the markets are doing well, they are getting good returns,” says AK Tewari, MD, SBI.

As much as I am tempted to talk to you about SBI, look at the way stock is rallying, good 7% today and we hear marquee investors are just logging in. I will hold myself back and put the spotlight on policy. There is a positive surprise, which is a very confident RBI, very gradually upping the growth view. In fact, ahead of the street, many of the agencies have their growth view slightly lagging. But at the same time, the Governor appears very cautious and steadfast on the inflation target. What did you make of today’s commentary out of these two issues?
I think the Governor has been really, really consistent in his approach. At no point in the several policies which have come in the last months or year has he ever ventured to predict too much. He has very clearly said every single time that our policy, our aim is to control inflation. And today also, he made it clear that till the inflation comes to the 4% band in a durable manner, we will continue with the stance of the policy we have. So in that sense, he also kind of put a little bit of a, if I may say, a dampener on the expectations of second quarter, third quarter etc.

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And I think that is the right approach, because policies have to be really consistent, stable, and all markets, all market participants like a stable policy. So as long as the objective is clear, and he also mentioned that the growth, I mean they had prioritised inflation over growth, because he said inflation control, low inflation is a prerequisite for a stable and sustainable growth.

However, the growth has also been good. So in that sense, it is going well. But it is the role of the governor to actually always caution the market that, yes, things are good, but keep watch out and we will keep watching and if warranted, we will take action. So that is the sense I got.

And, the other thing, this policy, everybody was watching out for mention of or some kind of either short term or near term liquidity measures, because that appears to be becoming a bit of an irritant for bankers, for corporates, on the one hand deposit rates, deposit growth is actually lagging credit growth, and deposit rates have to be kept high to compromise either on the margin front on the growth front. In fact, a lot of money is also seem to be coming out of FDs going to financialisation. How this bit of a near term issue for the industry?
Yes, this is an issue because you rightly mentioned that there are alternates available in terms of mutual funds and equity markets, where a lot of money from the retail depositors is going because the markets are doing well, they are getting good returns. And at the same time, the loan growth is outpacing the deposit growth for last several quarters now almost close to a year and a half. And in many cases, the CD ratios of some of the banks are also very high upwards of 100 or close to 100%. So in that sense to support the loan growth, clearly the deposits which have been a major source of loan growth, loan financing for the banks, there is a pressure on the deposit rates. And that is why we see that the deposit rates have been growing. And maybe in the near future, also depending on each bank’s own asset liability management, they could still go further if the loan growth continues like this. So that is one side of the story. And of course, there are banks who are forced to do short term borrowing also, because sometimes for mismatches, and those rates have also been volatile at the shorter end. So therefore, while there are no special dispensation has been given on liquidity, he did mention that one that they will use all tools as appropriate for ensuring that the liquidity is stable. And secondly, also mentioned that this is the last quarter and government balance, government spending generally picks up in the last quarter to account for various budgeted items which are there. And that is our expectation also that as the government spending increases in the last quarter, the liquidity will get some support at the shorter end as well.

Fair point. So it is just a matter of time. The industry forces may actually come back and address that issue on its own, probably. But banks are kind of slipping right now in trade, and there was some heightened expectations, something on liquidity may come. Just one last word I want your view on the additional measures, this policy announcement, far more interesting than the actual policy, especially announcement, a review required for the structure of the way online trading platforms are operating, that one and also need for enhanced transparency on SME loans. What are your thoughts on these two? Why were this on the regulators radar? Are there some practices out there which require much more transparent and review?
So electronic trading platform, I do not have any comments because clearly he mentioned the last review was in 2018. So there could be some improvements which the RBI must have felt. On the charges front, I think there are two facets to this. One is that it is being extended to all products in the MSME and retail so that is one, which is okay.
And the second part is, that is my sense, because I have to still read the full details, that we do disclose interest rate plus all these charges, including processing charge, upfront charge, documentation, everything separately.

And in fact, in our bank, we have created what is called a unified charge includes all charges so that the borrower has a clear idea that this is my final charge.

And now probably what he wants for retail and the MSME borrowers is that these charge plus interest rate on an annualised basis, what does it look like, so that it is comparable across different banks, because for our retail customers, sometimes hard to understand what my final cost is going to be.

So that is my sense. But I think one other announcement, which is very significant, and which people have not realised is the fact about the additional factors authentication framework. Because as he mentioned, the SMS-based OTP is the predominant mode and we have had a lot of instances where this has been compromised by various fraudsters.

So I think the newer alternatives which have been emerged, which have been emerging, I think that is a very, very important thing. And to actually stay ahead of the fraudsters, I think we need to shift to some of the other alternates, which he was mentioning so that is also interesting, in my view.

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