Excerpts from the interview, which covered areas ranging from financial inclusion to derivatives, ATMs to M&As.

First, do you suggest that there should be special incentives for bank customers to use ATMs particularly of other banks?

For the customer the ATM screen should be familiar, the ATM should have minimum downtime and be located at a convenient place. As the economy shows signs of transition into a “cash less” state and people use more of electronic channels, ATMs would get commoditised and become just an access channel. The moot question is, should ATM usage be encouraged through incentives? What kind? Currently ATMs are used mostly for cash transactions at odd hours, freeing the customer from carrying cash. On the flip side ATMs have to be very “cash heavy”, with attendant costs. Thus, customers should be able to use ATMs of any bank.

On countering the spillover effects of the sub-prime crisis.

Some special scheme to ensure flow of funds to large housing projects can be a positive step. It is high time market-driven housing indices come into being to bring in some type of price discovery mechanism. Such indices could become “bell weather” indicators of the state of the market.

Your views on financial inclusion.

The legislation to bring in moneylenders and their activities under regulatory purview awaits the light of the day. Meanwhile, to enable these “localised” players with superb terrain knowledge play a synergistic role in financial inclusion, some fiscal motivation to nudge them into partnership with banks would be welcome.

In anticipation of formal directives to be issued on money-lending activities, a simple registration process could be introduced in select banks.

Any signals on derivative product usage?

The appetite and usage confidence for risk products is on the rise. While, elsewhere, exotic derivative products have brought in woes, their frequency and intensity of use in India is still low.

The most enduring way of ushering in a knowledge-based environment for such products is to open up fountains of knowledge through online tutorials. Steps to increase such knowledge transfers could be encouraged through some fiscal measures.

Large PSUs have felt the need to have better treasury management. Along with measures to reform the treasury, usage of such risk instruments can be introduced in them and further steps taken to deepen the market for such products.

On incentives for investment by banks in infrastructure projects.

With airport and other core sector infrastructure projects on the anvil, financial closure of many such large projects becomes the critical success factor. Laden with ALM mismatches, banks could do with specific infrastructure incentives, to take on long-term exposures without a sense of desperation.

Besides, as in Singapore, there should be a disincentive for project overruns and poor management of BOT projects. The snarls on the recently-opened Delhi-Gurgaon “high speed” connector is a hard-hitting instance of lack of good project management and planning skills.

It could be possible to look at instruments with put/call options allowing the government to respond appropriately.

Your take on bank mergers, such as of SBI and SBS, aimed at creating synergies and unlocking value. Can such mergers be the forerunner for more bank consolidations?

Apart from tax-related issues, there is an expectation of incentive to address “softer issues” like HR and change management (which is more often a long-drawn exercise). Perhaps some innovative steps to amortise related costs of such mergers in the larger interest of the sector, can be looked at.

Just as the market rewards capital efficiency, fiscal disincentives would be appropriate to pre-empt bad managerial decisions, based on certain benchmarks.

D. MURALI

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