India has a strong potential and can easily clock a growth rate of around 10 per cent. However, there are some serious hurdles in the policy and regulatory framework that need to be corrected so as to be able to fully realise the potential, according to Sunil Kanoria, Vice-Chairman, Srei Infrastructure Finance Ltd.
In a discussion with BusinessLine , Kanoria spoke about the need to take certain corrective measures to put the economy back on the growth track. Some of the key changes would entail putting in place a regulatory and policy framework which goes well with the country’s ethos and culture, instead of merely aping global best practices; understanding the role of judiciary in the conduct of economy and changing the definition of NPA (non-performing assets). Excerpts:
How do you see the Indian economy growing? What, according to you, are some of the key challenges?
The situation our country is currently facing is challenging. There are things which need structural changes; otherwise, it will bring in a lot of pain, mainly for the financial sector, which is the life blood of an economy. India has a strong potential and can easily grow at 10 per cent. Understanding our culture, our working and our stage of growth is important. And then we need to change the regulations accordingly in consultation with the industry.
The challenges started when the judiciary cancelled the telecom licences. India has not really evolved fully from it. It is only getting more challenging. You have the government, the regulators and the judiciary.
If the government or the regulator does something the judiciary may overturn it and this uncertainty is impacting India.
So do you think the country needs judicial reforms so as to create a better ecosystem for growth?
A majority of the economic reforms that have been undertaken by the Centre, such as GST and the Insolvency and Bankruptcy Code (IBC), finally end up in court. So, you have created an ecosystem where everything is getting concentrated (into the judiciary). The judiciary needs to play an important role at this juncture. It has to understand the economic importance of judgments. Instead of taking call on commercial and economic matters, the judiciary should give that job to the execution; otherwise people who are executing it will stop doing that.
What are the key problems plaguing the country’s financial sector?
Coming closer to the financial sector, we have lost out on what real banking is and we are all to be blamed...it is a systemic problem and we need a systemic solution to fix this.
One of the things that we need is to change the definition of NPAs. Globally, banks do not disclose who the defaulter is because he then becomes almost untouchable. Today, if someone defaults by even one day, it goes into the entire ecosystem and everyone knows about it. No one then is willing to give him money. I feel economic failures need to be dealt with separately. The definition of NPA has to be changed so as to ensure that the recovery comes back into the system rather than letting assets go waste.
What would be Srei’s model of growth?
We will focus on asset financing, which was the core business when we started out in the 1990s, because India needs a lot of asset creation.
We are also exploring the possibility of merging into a bank but are still waiting for regulatory clarity on the same. We had attempted that in the past...we will be open to looking at it if the regulatory system allows it. But, at the moment, assuming not any of that happens, we have to put our house in order and that is what we are working on for the last one year — by releasing capital, selling portfolio and focussing on our asset financing business. We will focus on the leasing and co-lending businesses to scale up our revenue.
How do you see your business growing?
Today, for us, more than the growth, the focus is on reducing the cost of risk, selling old portfolio, recovery and reducing the cost of operations.
We will also look at developing the co-lending programme as the market evolves.