Axis Bank Chief Executive Officer Amitabh Chaudhry has urged the government and its institutions to push credit flow and ensure that the country has enough money in the system to enable entrepreneurs to take risks.
“Public sector banks will need strategic and operating freedom to start emerging as key risk financiers,” Chaudhry said at the AD Shroff Memorial Lecture in Mumbai. “Let us understand and appreciate that across the world government and its entities are the best financiers of residual risk that the private sector is not taking.”
Chaudhry noted that the private sector banks have already paid the price by taking on loss-making infrastructure projects in the previous cycle. This, he said, led to a loss of confidence in the providers of capital and triggered a shift away from project lending. Besides, he added the liquidity crunch in non-bank lenders and limited foreign funding means India's infrastructure funding requirements may not be met.
“The money which is out there is not going to be good enough to finance the needs of India,” he said. “Unless the government helps in creating more institutions or pushes the people who have the money in India to help in infra building and commit to them sacrosanct contracts, we have a problem on our hands. And its size will only increase.”
Chaudhry also called building “certain and justiciable rights” for providers of capital as the key to reviving risk-taking among lenders. “The equation between a creditor and a debtor earlier had been significantly skewed in favour of the debtor. As the bad loan crisis of the late 90s and mid-2010s create strong rights for creditors risk-taking from the side of financiers will eventually revive.”
Watch | Axis Bank's Amitabh Chaudhry on who will finance risk in India.
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