00:00Joining me first on the show is Soumya Kanti Ghosh,
00:04Group Chief Economic Advisor of the SBI,
00:06part-time member of the Prime Minister's Economic Advisory Council.
00:11Mr. Ghosh, there is back and forth which is happening
00:13between the Leader of Opposition Rahul Gandhi
00:15and Finance Minister Nirmala Sitaraman
00:17on the IDBI bank sale and the developments
00:20with regards to the Tata Group.
00:22Rahul Gandhi has questioned the government's approach
00:24to IDBI bank sale,
00:26while the Finance Minister has defended it.
00:30Is there a legitimate concern about valuation and transparency?
00:37Yeah, thank you, Maria, for having me on the show.
00:39Without getting into the politics of the arguments,
00:42let me now put some of the facts in front of you
00:46which are in public domain.
00:47I think the first misnomer is that the IDBI bank is being privatized.
00:51It is actually incorrect because IDBI is already a private bank
00:55from FI19 as per the RBI document.
00:58Because LIC and the government of India,
01:01till before the shares were being offloaded,
01:04were holding around 95% of the overall shares.
01:07So that is the first thing.
01:08So it is a private bank.
01:10The shares are now being offloaded by the government and the LIC.
01:13And even after the shares are being offloaded,
01:15the government and the LIC will still continue to hold
01:1834% of the overall shares of IDBI.
01:22The second point to note is that if you actually look into the history
01:25of the banking system in India,
01:27I just wanted to take a couple of minutes to explain this.
01:29I think from the years of, say, FI19 till FI14,
01:35the entire banking system,
01:36the credit growth was actually around 17%.
01:39And the credit growth to the infrastructure sector
01:41grew at a staggering 27%,
01:44with two of the years, FI10 and FI11,
01:47witnessing credit growth to infrastructure sector at close to 40%.
01:52Mirroring that trend,
01:53the IDBI credit growth from FI6 to FI10 grew at 27%.
01:59And IDBI, you should remember,
02:01was a completely a corporate bank.
02:03Most of these loans went to the telecom sector,
02:05the power sector,
02:06the infrastructure sector,
02:08the road sector,
02:08textile sector,
02:09all of we know that.
02:11However, in FI,
02:13after this process,
02:15what happened was that from FI16 till FI20,
02:19when the RBI started the AQR exercise,
02:22the asset quality review exercise,
02:24and the government of India,
02:25in conjunction with the Reserve Bank of India,
02:28started a process of resolution,
02:31recapitalization,
02:32recovery,
02:33and recognition of the stressed assets in the banking system.
02:36In fact, interestingly, Maria,
02:38if the point which I wanted to highlight again,
02:40is that the crisis of the IDBI bank
02:42actually goes back to as early as FI10,
02:45when after the credit growth of 27% for four years,
02:48from FI6,
02:49when the bank was incorporated,
02:51the credit growth collapsed to below 10%,
02:53and possibly that was the beginning of the problem in the IDBI bank.
02:59From FI16 till FI20,
03:01the accumulated losses in IDBI bank
03:03was a staggering 45,000 crore.
03:06In FI20,
03:07the government and the LIC infused
03:09close to 50,000 crore to the IDBI.
03:12They deselected the bank,
03:13and today the IDBI bank gross NPA ratio,
03:17which was as high as 31% in one of the quarters.
03:21That means every one in three loans were going NPA.
03:24The bank today has an NPA,
03:27which is less than 2%,
03:29and an overall cumulative profit in the last five years
03:32has been close to 35,000 crore.
03:35So it's a profitable bank,
03:36and as you know,
03:38any bank which the shares are offloaded,
03:40it can be only done if the bank is profitable.
03:42So I think that the story about IDBI
03:45are being misquoted and misfounded in the public domain.
03:51Mr. Ghosh,
03:52public sector banks are assets to the nation
03:54is something that Rahul Gandhi has said
03:57in that open letter to the IDBI bank family.
04:00Isn't that something that you would agree with?
04:04See, I agree completely with the fact
04:06that the public sector banks are an asset to the nation.
04:09Today, the banking sector profitability,
04:12if you look into the banking sector,
04:13specifically the public sector banks,
04:15today the profitability of the public sector banks
04:18are now higher than the private sector banks.
04:20The cumulative profitability of the banking system
04:23in the last fiscal year was 4 lakh crores,
04:26of which the public sector banks
04:27actually contributed a little more
04:29than the private sector banks.
04:30So I completely agree that the public sector banks
04:33are an asset to the country.
04:37They should be always been nurtured.
04:39And this has exactly been going on
04:41in the last 10, last 12 years.
04:43The RBI financial stability report,
04:46which has been published recently,
04:47has gone on record and saying
04:49all the parameters of the banking system,
04:52profitability, asset quality,
04:54then the return on assets,
04:56return on equities
04:57are actually at multi-decade highs.
04:59You tell me, Maria,
05:01if you have a system,
05:02the public sector banks,
05:03if you don't recognize the stressed assets
05:05in the banking system,
05:06which had built up prior to the global,
05:08before 2014,
05:10how can the banking system be sound?
05:13They were,
05:14all these bad assets were recognized,
05:16put on resolution.
05:18The government put in 3 trillion
05:20into the banking system
05:21as recapitalization,
05:22repairing,
05:23and return of the balance sheets.
05:25That's why the banking sector balance sheet
05:27today looks so much sound.
05:29And in actually,
05:31if I use the term,
05:32it is in a Goldilocks period.
05:33So in my sense is that
05:35a banking system,
05:37a sound banking system,
05:38I always agree,
05:39is a perfect precursor
05:40to a sound financial system
05:42in the country.
05:43And I have no hesitation
05:44in saying that
05:45the banking system today
05:46is actually in the best of health
05:48for all the efforts
05:50which has been unveiled
05:51in the last decade or so.
05:52Mr. Ghosh,
05:53I'm going to shift focus now
05:55to another issue
05:56which had the finance minister
05:58reply to Rahul Gandhi.
06:00And this is with regards
06:01to the developments
06:02within the Tata group,
06:04which have raised questions
06:05about governance
06:06and institutional control.
06:07How serious is this
06:09for one of India's
06:10most respected corporate houses?
06:13I don't want to comment
06:15on the Tata's
06:16because it's an issue
06:17which we don't comment
06:18because as a bank,
06:20all the clients,
06:22so I would not like
06:22to comment on the Tata as such.
06:26All right.
06:26So let me ask
06:27and perhaps frame
06:28that question differently.
06:30That will make it convenient
06:31for you to respond.
06:33The larger concern
06:34with regards
06:35to corporate governance framework,
06:37how do you look at that?
06:39No, I think,
06:40I don't want to again
06:41emphasize,
06:42want to comment on that.
06:43The only point we can say
06:44is that India
06:45has a very strong
06:46corporate governance culture.
06:48The SEBI as a regulator
06:49has been monitoring that.
06:50And I think
06:51all these,
06:53I mean,
06:54even if you ask me
06:55in terms of
06:56corporate governance
06:57or anything else,
06:58my sense is that
07:00we have a very strong
07:01corporate governance culture
07:03and everything
07:04is transparent
07:05and everything
07:06is out in the market domain.
07:08So there is nothing
07:08to discuss
07:09in terms of
07:10governance failure
07:11in any of the institutions
07:13in a country like India.
07:16I mean,
07:16there are no record
07:17as such
07:17if I remember today
07:19in terms of
07:19any such failures.
07:21All right.
07:23Really appreciate your time.
07:24Thank you for joining us.
