The Hindu Business Line : Govt must keep out of business, says Vaghul

WHILE asserting that the Indian banking system had come of age and was probably the most sophisticated in the Asia region, the Chairman of ICICI Bank, Mr N. Vaghul, opined that the Government should, in the new paradigm "keep out of business and concentrate on governance. The pullout should be abrupt."

In an informal chat with presspersons, Mr Vaghul, who was in the city to deliver the 125th Rajaji Endowment Lecture on `Relevance of spirituality in the modern times' said that mere divestment did not mean that the Government disassociated itself from business.

"For instance, who appoints a chairman?" he asked and pointed out that the political interference was a stumbling block to the growth prospects.

According to him, the Government's withdrawal should be "abrupt" and not gradual. "Only if you throw the baby into water will it learn how to swim," he said to substantiate his argument, when it was pointed out to him that the industry still sought Government support.

He, however, was not averse to a regulator. "A qualitative intervention is adequate," he said.

Reverting to the present, he said that most banks had been able to deal with the legacy problem of bad debts. "The economy pick up has been good and the credit offtake has improved," he said.

When asked how long he expected this trend to sustain, Mr Vaghul said the industrial recovery had just started to take place and it was clearly the beginning of sorting of these issues. The major demand was not just from the retail segment but it was reinforced by the infrastructure and industrial segment as well. "However, sustaining the recovery depends upon the policy that we are going to pursue. There are two issues/bottleneck that need to be sorted - on the agricultural front (for building a strong infrastructure) and dealing with infrastructural issues like in power, roads, ports and airport."

Commenting on the economic growth rate, he said that achieving a 10 per cent growth rate was well within reach. "At the speed with which we are progressing, it is not too difficult to achieve the 10 per cent growth rate soon. The agricultural prosperity has not been as good as the retail demand. But we can strive at increasing the per hectare yield," he said and conceded that the underlying factor was the monsoon.

He emphasised the need for strengthening the agricultural infrastructure by improving the post-harvest technologies, by taking to irrigated cultivation practices and adopting a holistic approach in managing men and material.

Replying to another query on the performance of the banking sector, he said the last two years had been good, as a majority of the banks had made good profits from treasury operations. "These profits have not been frittered away. But the pressure is mounting."

Though the interest rates had stooped downwards at present, Mr Vaghul expected these rates to look up with improved economic outlook. "The present growth rate is real," he said.