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00:00And Lizzie, we're talking about Indian banks. We've seen a flurry of deals with foreign banks worth about $15 billion.
00:07I have with me the CEO of Axis Bank, which is the third largest private bank in India by assets.
00:14Let's get his perspective on whether those deals are sustainable going forward.
00:18Amitabh Chowdhury, we thank you so much for joining us.
00:20What do you think? Those deals, are they sustainable? And what does it mean for Axis?
00:24Well, firstly, the good news is that so many of these deals are happening and they're coming and investing in some of the mid-sized players in the country.
00:31So it obviously clearly indicates that they find the Indian market attractive.
00:35They like the GDP growth rate. When they look at their markets, they believe they can make those returns.
00:39And it's good for the banks where this investment has happened because it gives them staying power.
00:43They have foreign brands backing them and so on and so forth.
00:46The only issue I have with this is that banks are the most leveraged institutions in the world.
00:50And the only way for them to really grow is to be able to get the deposits in.
00:55And getting deposits in India is not the easiest of things.
00:58Your local brand, local presence, local debt matters, and that will take a long time.
01:03So each of these investors who come into India, I'm sure, have a very, very long-term view.
01:07And they do need that long-term view to be able to leverage the capital they're infusing in these entities completely.
01:12We'll pick up on deposits just slightly later.
01:15I'm just wondering, in terms of these deals, how many more are you looking at?
01:18How big are they likely to be? What does it mean in terms of competition for you?
01:22So, well, I mean, obviously, the reason these banks are coming in is because they believe they can add value to the institutions they have invested in.
01:28And it could lead to increased competition.
01:29We are also hearing about merger of public sector banks to make them bigger and larger.
01:34There's also one or two divestments being talked about by the government and, again, some foreign players and some local players have shown interest.
01:40So the competition is intensifying.
01:42I mean, by the way, there's enough competitive intensity anyway.
01:45So we are all generally well prepared for it.
01:47I do believe that one or two of these institutions will be able to come out from that mid-sized bracket and give competition to some of the larger banks.
01:56I think there are, in India today, only five or six banks who can cater to every requirement of a customer across the entire value chain.
02:04India, given the size of the economy, given the ambitions of the government, does need many more banks.
02:08So the competition is welcome.
02:10Competitive intensity is high.
02:11Mine increase a little bit.
02:12Not that I should say it does not bother us, but we are well prepared for it.
02:16Consolidation.
02:16Is that expected?
02:18We know that the RBI, the government, they pretty much want the big banks to consolidate further.
02:23Where are we with that?
02:24So consolidation will happen.
02:26The problem is that the ones you want to consolidate don't want to be consolidated.
02:29The ones who are not worth buying are the ones which are available for sale.
02:32But I think over a period of time, as disproportionate share of profits continue to remain with the larger institutions, I think some of the banks might be forced to look at the strategy all over again.
02:43You are seeing that in other parts of the markets also.
02:46It's not that banking is the only one.
02:48So I would expect consolidation to remain a theme for a long period of time.
02:51Now, how many happen?
02:53How many go through with whom?
02:54Only time will tell.
02:55How many?
02:55What is the right number?
02:57I think, you know, obviously we have a large number of banks, but India does need, in my mind, at least eight to ten large institutions to support the economy who can, as I said, play across the entire product suite.
03:08Right now, we don't have that.
03:09So the small banks are at risk.
03:11Fair assumption?
03:12I mean, either they decide to stay small and just cater to a certain section of the population or a certain product suite.
03:18If they want to be large, if they want to play across the entire spectrum, they need to be much larger than where they are today.
03:23So right now, deposits, a huge problem for Indian banks.
03:27Why is that?
03:27Is it a case of, you know, retail, you know, I guess the mom and pops, they're putting their money basically in the equities market.
03:33Is that it?
03:34They're propping up the equities markets in a huge way.
03:37So, well, you know, that money which the small investors are putting in, it does come back.
03:41The nature of the deposit changes, but the money remains in the deposit system.
03:44The problem is not that.
03:45The problem is that initially RBI had curbed liquidity quite a bit, which obviously played into the low growth of deposits.
03:52Government is also carrying a lot of surplus balances so that money is not in the economy.
03:56Also, RBI had infused a lot of cash in the system.
03:59So when you look at all of that, the basic flow of money to the deposit system, the banking deposit system has definitely slowed down.
04:06RBI has stated openly that they would like to maintain certain durable liquidity in the system.
04:13We have seen times when that has not been possible because RBI has intervened in the foreign currency market.
04:18So liquidity has got kind of sucked out a little bit.
04:20But the expectation is that RBI will stick to its stated stance and bring durable liquidity in the market.
04:26That should help in deposit growth.
04:28But if on the credit side, the expectation is that the Indian credit growth will be 15 to 17 percent, ultimately deposit growth also should be a similar number.
04:35It cannot be different.
04:37And I think we are still some distance away from it.
04:38So when realistically, can we see that pick up in deposits?
04:41I think it's another, in my mind, and I'm just throwing it out here, 18 to 24 months is the minimum time required for deposit growth to come back.
04:48And that will require sustained intervention by RBI in terms of ensuring that the durable liquidity remains and this deposit growth continues to move forward.
04:57Another thing which is happening in India is that, obviously, as I said, nature of the deposit is changing.
05:01So the cost of funds overall for the system is rising because the wholesale deposits tend to come at a higher price than...
05:05It doesn't help that the RBI cut rates four times at 125 basis points.
05:09That is part of the reason why you're having trouble with deposits.
05:12Yes.
05:12I mean, obviously, we have not been able to pass on the entire cut on the reverse report side in form of deposits,
05:18while the interest rates on the lending side have definitely kind of come off a little bit.
05:22So you have seen squeezing off net interest margins of various institutions.
05:25I think it is stabilizing now.
05:26Hopefully, from here on, assuming no further interest rate cuts happen, the net interest margins will start stabilizing or start moving up.
05:34Please understand that RBI also has institutionalized that if they cut interest rates, they need to be passed on to the customers very, very quickly.
05:42So all of us, literally within the quarter in which the interest rate cut is announced, have to pass it on to the customers.
05:48In our case, the number is 60 to 65 percent cuts happen immediately.
05:52Amitabh, I want to talk about the rupee, the Indian rupee among the worst performers in Asia.
05:56In fact, it was the worst performer in 2025.
05:59Is that a reflection of the economy?
06:01And how can it be so weak when the economy is growing at seven and a half to eight percent?
06:05That is reflected in our stock markets also.
06:06We are one of the worst performing stock markets.
06:09So, yes, I think it's just reality on the ground.
06:11If you look at the net FDR inflow, it was close to zero.
06:14Gross was one percent.
06:15An economy which expects to grow anywhere between seven to eight percent, the net foreign direct investment should be in, you know, three to four percent range.
06:22We are still far away from it.
06:24I think the investors generally have moved away from India.
06:28They have gone to China and some of the other markets.
06:29I think there is a belief somewhere that maybe on the AI side, India has got left behind a little bit.
06:35Government is fully cognizant of that fact.
06:36So, you have seen constraints being removed on fiscal, monetary side and the regulatory side.
06:41Government has formed various committees.
06:42You have seen some reforms which were not even thought were possible earlier.
06:47So, I would say that the government realizes that they have a bit of a problem in their hands.
06:51I think they are very, very focused on trying to see as to how they can remove some of those cobwebs.
06:55I expect the budget to continue to reinforce that notion.
06:58And hopefully, hopefully, that should reflect in foreign investors wanting to come back to India.
07:03And that should reflect in the currency over a period of time.
07:06At least it should not slide at the pace it has slid.
07:08What can the budget do?
07:09What do you expect from the budget to prop up the currency?
07:12Well, you know, one is that the fiscal consolidation has to continue.
07:15So, people have to believe the story that India will continue down the path of fiscal consolidation.
07:19I think they have to do a lot more in terms of ensuring that the share of manufacturing in our economy continues to grow.
07:25That MSMEs, the small enterprises, are supported much more than what has been done in the past.
07:29Government needs to continue to support manufacturing in terms of doing something about some very specific schemes for some of the sectors of the economy.
07:37End of the day, we want to come out of the mid-income trap.
07:39But we need to invest a lot on R&D and creating global product firms.
07:44We're still far away from it.
07:46I think the time is slipping by.
07:49And the amount of money which government has to commit to invest has to be many times more than what they have done until now.
07:56So, let's see what the budget is able to accomplish.
07:58And Amitabh, what's fair value for the Indian rupee?
08:01And do you see the RBI under pressure to actually support it?
08:03It's done something, but it's not enough to reverse.
08:07So, RBI's stance has been that we don't intervene in the foreign markets.
08:10We let the rupee do its job.
08:11The only thing when we come and intervene is when there are sudden spikes which happen.
08:15So, they are saying that we are not trying to aim a range.
08:19We are not trying to have a certain number in mind.
08:21But, yes, if the spikes are there, we do support the currency so that the exporters and the importers don't support.
08:25What's fair value?
08:26My mind is that I think India has seen a pretty sharp depreciation over the last 12 to 18 months.
08:31with a lot of the other things which are happening and what are happening around the world.
08:36Hopefully, the rupee should stabilize in this range as we go forward.
08:39All right, Amitabh.
08:40Thank you so much for your time today.
08:42Amitabh Chowdhury there, CEO of Axis, Bang Lizzie.
08:46Hand it back to you.
08:46Of course, he says that, you know, he expects the rupee to stabilize somewhat, but it has had some issues.
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