Relax NPA norms, increase liquidity and cut rates, says Aditya Puri
The Indian Express
March 24, 2020
Sandeep Singh
As the spread of the coronavirus is creating a scare in society, business and markets, Aditya Puri, MD at HDFC Bank, told Sandeep Singh that while monetary policy should look to relax NPA norms, increase liquidity and cut repo rate, the government should focus on limiting spread of virus, providing stimulus and not prioritise fiscal deficit. He added that HDFC Bank is ready to help out its customers who may face repayment issues and added NPAs on account of cash flows and coronavirus will not be treated as NPA and regulatory forbearance is the need of the hour. Edited excerpts:
What is your biggest concern as of now?
My biggest concern is control of the spread of the coronavirus and, in the sequence of events, this has to be solved first. I fully support the lockdown and I think that if more lockdown is necessary, it must be done till we see the flattening of the curve in the number of new cases.
What all things are required from government and regulatory authorities?
As far as the monetary policy is concerned, three things are required. Since the lockdown affects the cashflow of firms, we need relaxation in NPA norms and banks must be ready to be able to give them liquidity so that they can tide this situation. There should be more than ample liquidity maintained, so that whoever needs the money gets it. Also, just like the rest of the world has done, a cut in repo rate is needed. As for the fiscal, I would like to say it is not a priority today and we have ways to bring it down over a period of time. But today the first thing is to control the virus and the difficulties it is creating. We definitely need a stimulus and need more spending to ensure the requisite facilities for healthcare is in place. We need more spending and more money to be given to daily workers and whatever concessions the companies require.
What is the concern for banks?
Banks must be ready. At HDFC Bank ,we have liquidity of about $5 billion and we are ready for our customers and we are already moving to help them. We are sitting down with them, finding their upcoming dues and assessing his capability. If he asks for a postponement of instalment, then what we need at this point of time is regulatory forbearance, that this will not be treated as NPA. That’s because it is more of a forced NPA due to cash flow and coronavirus, rather an issue of quality.
During the lockdown, some amount of effect can be had on growth. It may take 3-9 months, however, if a vaccine comes or if we can break like China or Korea, then the recovery will be faster.
It is a demand issue now and, for that, stimulus is required.
While you say that it may take 3-9 months, what are you basing your business continuity plans on?
We are basing it on the fact that people will need banking. What we have done is around 35 per cent is already working from home. We have hired some 100 buses, which will take employees to sanitised offices. All necessary precautions are being taken so that basic services-related banking can be provided. We are talking to hospitals as to how we can improve their facilities as for our CSR responsibility and we haven’t set a limit on that as yet.
The markets fell the most in a day today. How do you see the continuing fall?
I think they have taken the lockdown negatively, which is a short-sighted view. Markets always overcorrect on both sides. Tomorrow, if you are able to contain coronavirus then it will change so fast that you don’t know what hit you. The markets will come back after the crisis as it does everytime.
How do you see India doing once the crisis is over?
If we are able to flatten the curve, then there are other benefits that flow in. Today, oil, commodities — which are our major imports — is a major benefit to us. We are also not too much involved in global trade, so if global growth goes down, everybody will be hit, but we will be hit a little less. And if we can take appropriate actions and sort the issues one by one, then in the end we will come out as one of the shining countries.
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