How do you see the growth versus inflation dilemma
In every economy, if you want to have growth, your inflation has to be low. And if you have to control inflation, you have to, sometimes, sacrifice growth. But, the basic message should be very clear that unless there is low inflation, there cannot be high sustainable growth.
Do you think the ongoing act of rising rates by the banks will create NPAs in the industry
If the interest is low, then the NPA will also be low. Only if the interest goes beyond a sustainable level, it creates problem. But rising rates may not always affect economic growth. Interest rates account for only 6% expenses by a corporate. If they can reduce certain costs, they can take care of the rising rates. Or, if I can pass on the cost to the end users, then too one can take care of rising rates. But then, beyond a particular stage, you cant pass it on. And, when the rates are high, then it means economy has some problem. So, everybody suffers.
What can sector banks do to more closely monitor NPAs
Banks should keep a watch on all the sectors, especially when they feel that there is some problem in the economy. If some sector specific information lead is there, then from there they will find out that what are the other sectors are to be looked at.
But when banks are monitoring the health of credit flow, they can find out the problem. If they find some segments are having more stress, they should pay more attention to that. My advice to banks is to see that all the accounts, including good ones, are monitored.
How do you see the problem of high rates affecting the credit flow to needy sectors like SMEs and infrastructure
There is no problem in the flow of credit to these sectors. But in a society, poor shouldnt subsidise the rich. If the rates are going up, the poor people are not getting compensated. What is happening is that the rich is paying low rates while the poor is forced to pay more. This needs to be corrected. It is our job as a regulator to ensure this. The banks are free to devise schemes for these needy sectors.
Bank have a vested interest in the balanced development of a society. If the society develops, they will get more business. We can only advise them. The credit flow to the SME sector has not suffered so far. If the banks are not able to manage their own infrastructure and keep the cost down, they are free to charge more. Introduction of more innovative technology will help them control their cost.
You recently remarked that banks are not providing authentic data. Wouldnt suppressing data amount to fraud
Banks across the sector are not reporting authentic data. We can standardise in case of non-financial reporting. If that happens, financial reporting will get stabilised. But, the problem is that violations happen when the incumbent changes. Whenever a new branch manager takes over charge, he says NPAs are high. What I expect from banks is to be accurate on four basic characteristics, which may include unbiased, consistent, efficient and sufficient. I do agree that the last two may be difficult for the banks to achieve, but there is always a scope for improvement on the first two counts. We are in dialogue with banks, accounting professionals, management and we are improving our supervision system.
RBI has grand plans to connect to banks management information system (MIS) directly. What is the status of the venture
We are trying to improve the current system of seeking data from the banks, though I dont have an instrument to measure it. We are trying to have a system in which we can directly get the data from a particular bank to our own data centre. But the problem is that only transactional data will come to us. Hopefully, the project will take two years time to complete.