Are we just plain lucky that we are a little less affected by the global meltdown than the Western world?
Or is there a method in the slow but steady growth that the economy has seen in over a decade that was then criticised by all?
These were just some of the questions that were debated by some of the best-known names in the Indian financial sector at the ‘Mint Clarity through Debate’ forum on Monday that dwelled on Financial Sector Meltdown: Lessons for India.
“The origin of all financial crisis is excess money being borrowed, excess liquidity and complacency over the borrowings,” said K C Chakrabarty, chairman and managing director Punjab National Bank in his opening remarks.
Knowing the customer featured high on HSBC chief executive Naina Lal Kidwai’s, list of how banks could lend and recover loans better.
“There’s nothing better than good old traditional banking,” said Kidwai who was also very vocal about the Reserve Bank opening the doors for foreign banks.
Speaking on lessons that India could give the rest of the world, Chanda Kochhar, joint managing director, ICICI Bank said: “India has followed the practice of very basic lending along with very low leverage and the deposits kept in reserve have accounted for low non-performing asset (NPA) levels contributing to a sound banking system.”
Giving scope for debate, former Sebi chief M Damodaran said that we may have been criticised for being slow, but it is this approach that has left us much better off than other economies.
“The Western world created a recipe for disaster when they invited people who by no stretch of imagination could pay back, to take loans from their banks,” he said.
Speaking on the importance of the right kind of incentivisation for banks OP Bhat, chairman, State Bank of India said: “Public sector banks are more efficient even though there is no practice of incentivisation,so we need to pause and think if incentivisation really works.”
But it was probably Lord Meghnad Desai, Professor Emeritus, London School of Economics who had the last word quite literally, when he pointed out that financial inclusion of the masses was still a dream and only when India learnt that lesson from the rest of the world would it stop being “like a frog in the well and feeling so smug about itself.”