Top bankers hail work of outgoing RBI Governor D.Subbarao

RBI Governor D Subbarao demits office on September 4, after being at the helm for five years that saw the beginning of the global recession from which it is yet to recover

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Mumbai, Sept 2:  

Top bankers have hailed the contributions of the outgoing Reserve Bank Governor Duvuuri Subbarao saying he did his best during a tenure that was marked by difficult times for the economy.

“I think the Governor’s (five year) term has been in one of the most difficult environments globally and domestically.

“If you look at the world and our country today, there is so much change that you have to be at your feet and I can’t imagine anybody else doing a better job (than Subbarao),” Axis Bank Managing Director and Chief Executive Shikha Sharma said.

Subbarao demits office on September 4, after being at the helm for five years that saw the beginning of the global recession from which it is yet to recover.

Within a fortnight of him assuming office, global investment bank Lehman Brothers filed for bankruptcy and the hit pulled the global banking system down to an unprecedented credit crisis which eventually led to the worst recession since the Great Depression.

This was followed by a difficult period which saw RBI working in close coordination with the government and other financial sector regulators, as also other central banks, to ring-fence the economy.

While the fiscal and monetary stimuli ensured that the economy did not fall off cliff, this soon gave way to a spike in inflation. This saw rise in policy rates from October 2010 for a year or so even as growth started coming down.

As Subbarao’s term moved close to ending, worries over slowing growth and stubborn inflation complicated the matter for the central bank. His problems got compounded with the fall of the rupee beginning May-end. It declined to a low of 68.85 intra-day to the dollar early last week.

“I’ve the highest respect for him. He has been through difficult times and let’s put it this way: in hindsight, it’s very easy to judge anybody...I do believe he did a great job,” Aditya Puri, who heads the second largest private lender HDFC Bank, said.

“One thing that has not been fully talked about during his tenure is that he has reduced CRR and SLR by 4 percentage points, which to my mind, in a tenure of five years is very significant,” said Pratip Chaudhuri, the chairman of the country’s largest bank State Bank of India.

Chaudhuri, who favoured doing away with CRR, added that its reduction was one of the reasons for the economic buoyancy during early part of Subbarao’s stint.

“To some extent, the buoyancy which we saw in the economy in the previous two years, could be attributed to that,” Chaudhuri said

SBI chairman rules out lending rate hike

A day after steeply hiking bulk deposit rates, SBI chairman Pratip Chaudhuri on Friday ruled out any hike in lending rate, although many private sector banks have done so due to the uptick in the cost of funds following RBI's liquidity squeezing moves. "Currently no," said the head of the nation's largest lender when asked if a base rate hike is being planned following its up to 150 bps hike in bulk deposit rates. Top private sector lenders such as ICICI Bank, Axis Bank and HDFC Bank have raised their base rates or the minimum lending rate following the recent tightening by the Reserve Bank to arrest the fall of the rupee since July 15. The domestic currency has lost more than 21 per cent against the US dollar since April. Industry insiders say state-run banks may not increase lending rates due to "diktats from the Finance Ministry". Andhra Bank, whose chairman B A Prabhakar retires tomorrow, is the only PSB which has hiked its rate by 0.25 per cent early this month. He said Andhra Bank's move is an exception as "the cost of funds is quite modest. Our base rate has always been low, that is our hallmark because deposit collection is efficient. Our average cost of funds is only 6.7 per cent." Chaudhuri, who will be retiring by next month-end, said the bank has decided to raise rates -- generally seen as a precursor to a similar action on lending rate -- on deposits of over Rs 1 crore. State Bank of India has the smallest composition of such bulk deposits, the pricing of which the bank raised by up to 1.5 per cent on Thursday. However, there will not be any deposit rate hike for deposits under Rs 1 crore, the SBI chairman said. In a series of moves, including capping banks' overnight borrowings, RBI has squeezed the liquidity, sending short-term rates to a high of 300 bps to 10.25 per cent. Chaudhuri reiterated that banks with a higher reliance on short-term instruments like certificate of deposits and commercial paper are the ones raising their rates. Meanwhile, he said the bank will announce the name of one associate bank for merger by end of September. When asked his reaction to the dismal GDP data of 4.4 per cent for the April-June quarter, Chaudhuri said: "As a banker, it does not affect me. Stock market people give a PE multiple base on growth, but as a banker I am only concerned whether they are servicing my debt. I am not too focused on where the stock market is going."