How will the recent global market turmoil affect our economy and the interest rate cycle?

It is too early to predict the effect the recent turmoil may have on the Indian growth story. Nobody is sure whether the current turmoil is of the same magnitude as that of 2008. But irrespective of the magnitude of the crisis, the Indian economy may remain more or less insulated as was the case in 2008. In my view, even in the worst case scenario, the economy would grow by around 7-8%.

KR Kamath, Chairman and managing director, Punjab National Bank

While a slowdown does not augur well for the overall economic scenario, it may result in cooling off commodity prices, particularly crude, and thereby inflationary pressure. And that would mean that we may be at the peak of the interest rate cycle.

During the 2008-09 recession, banks became very cautious in lending to customers. Will that be the case even this time if there is a slowdown?

Banks always do their due diligence before lending and we would continue to follow the same procedure, irrespective of the economic situation. It is a wrong notion that banks became cautious in lending in 2008-09. In fact, during that period, government-owned banks as a group increased their market share both in terms of deposits and credit. But at the same time, it is true that some banks, mostly foreign and private banks, had cut down on their exposure and their customers faced difficulty in getting a loan.

The committee headed by former Securities and Exchange Board of India chairman M. Damodaran on customer services submitted its report recently and RBI has invited public comments on it. Your views on the major recommendations of the committee.

We are studying the recommendations of the committee and will formalize our views soon. While the level of customer services in banks is reasonably fine, there is always scope for improvement. A satisfied customer is the biggest asset for a bank and we are all for providing better services. We would keenly wait for RBI’s guidelines on the same.

But can’t banks implement some of the recommendations on their own? For instance, having a timeline for disposing a loan proposal.

Yes, banks can implement some of the recommendations on their own but if the regulator provides certain guidelines, the implementation would be much better. For instance, the regulator has prescribed a definite timeline for disposing a loan proposal from small and medium enterprises and banks have no choice but to adhere to the timeline. Similarly, if the regulator prescribes a timeline for retail loans, we would have to adhere by the timeline. However, in general, these banks take only a couple of days to sanction retail loans.

Many experts and bankers have pointed that the real estate sector is a problematic area due to high valuation and are treading cautiously before lending to the sector. Are you of the same view?

As stated earlier, we do due diligence before lending to any person or sector. The same is true for real estate but we do not view any particular sector, including real estate, as a problematic area.