MV Nair, Indian Banks? Association chairman and also the CMD of the Union Bank of India, does not see any trouble for the government in raising debt. Nair spoke to FE?s Sunny Verma and Mahalakshmi Hariharan at the Ficci-IBA banking conclave. Excerpts:
Have the banks lost appetite for fresh government borrowings?
This time the government borrowing has been on the highest side. Considering that 24% is what we need to keep in the SLR (statutory liquidity ratio), most of the banks are much above the mark. When availability of paper is in abundance, then the escalation (in yields) comes up and banks invest only when the price is appropriate. Till now a substantial part of the borrowing is already over for the first half of the current fiscal. So I think from the next tranche onwards, those (yields) may slightly come down.
Can the difficulty in raising government funds scuttle the fiscal expansion plan?
I don?t think so because it?s the perception of market players that is important. If the bid is not acceptable, the Reserve Bank is not comfortable with the kind of yields it doesn?t do (the auction).
Should the RBI raise the SLR to drive in the borrowings?
The Reserve Bank takes a call at the appropriate moment.
But what is your opinion?
This is something on which I would not like to comment because the Reserve Bank?s basic stance is to maintain financial and price stability. So in that context, the Reserve Bank takes all measures based on the details available. It is not appropriate for me to comment.
Is the relaxation for primary dealers to keep more bonds in the held-to-maturity (HTM) category not an indication of a trouble brewing up? Some bankers are also demanding similar relaxation.
Bankers will keep demanding certain things but what is appropriate regulation is more important. My view is that we have reasonably good protection in terms to shifting into HTM. Of course, we do ask for too many things but it is for the Reserve Bank of India to take a call.
The finance ministry plans to start repos in corporate bonds and roll out a separate debt management office. How do you see these two measures?
These are well-awaited reform measures and they will be very positive for the market.
We hear the regulator plans to mandate banks to disclose off-balance sheet exposure. Is it apt?
It?s absolutely the right decision. And if you look at the Indian banking system, you have to give a lot of credit to the banking regulator that they have been focusing on transparency and disclosures. Most of the banks today do it but it is always better to be mandated by the regulator.
What is an appropriate minimum lock-in for securitisation products?
I can?t comment on this.
Should longer maturity loans, such as home loans, attract higher lock-in duration as compared to, say, short-tenure personal loans?
If the lock-in can match the maturity, I think, I would not like to comment on that. I have not done my thinking on this aspect.
The committee set up to review the BPLR system seems to have a suggested a twin benchmark structure for corporate and retail customers. Is it appropriate?
I don?t know. I haven?t seen the draft report.
When do you plan to raise Rs 1,500 crore?
We are monitoring the markets conditions and will approach the market when it is appropriate.
Do you see credit demand picking up going forward?
There are clear signs of credit growth picking up in the last month with corporates coming out with new investment proposals. Corporate loan sanctions are picking up and we will see credit growth in the second half of this fiscal.