Note ban has squeezed timeframe for digitisation: KV Kamath

Supporting the government’s decision to demonetise high-value currency in November last year, former chairman of ICICI Bank and President of the New Development Bank (NDB) KV Kamath said it has not only deterred back money hoarders but has also given a big push to online transactions.

“The biggest good that came out of demonetisation is the digital push that it has given to the country. Suddenly, a seven-year timeframe has been compressed and it has enabled a lot of activities to be done online,” he told BusinessLine.

With the remonetisation exercise now almost complete, Kamath said the economy should also be “back in gear”.

Prime Minister Narendra Modi had on November 8 announced withdrawal of the old currency notes of ₹500 and ₹1,000 to tackle tax evasion and fake currency.

Kamath, who is in the Capital for the NDB’s second annual review meeting, said he had come out in support of the move way back in December last year.

Its eventual impact on black money evaders would depend on administration. “But with the use of technology to track and trace money and the checks and balances that have been put in should certainly be a deterrent,” he said.

When asked about high non-performing assets of banks, Kamath reiterated the need to clean up and resolve these assets.

He, however, said it has to be seen whether a ‘bad bank’ is required and how it will be funded. “First, the banks will have to work out what they can do with the asset and what it will require to make it productive again,” he said, adding that the second part would be whether they choose to keep it or sell it.

“If there is a buyer with the money ready, then do sell it. But if the bad bank is not funded then how do banks go about getting the asset off the books. To me, it is a question of doing the work out first. I think that’s what the government is addressing,” he said.

Gross NPAs of public sector banks rose to ₹6.06 lakh crore in December 2016 as compared to ₹5.02 lakh crore as at end-March last year. The Finance Ministry and the Reserve Bank of India are understood to be now working on further measures to address the issue.

Kamath said the NDB plans to lend ₹2.5-3 billion in 2017 for a total of 15 projects.

“These should be in sustainable infrastructure areas, including in green energy, which we believe has a great future,” he said.

Founded by the five-nation bloc, the Bank put in $1.5 billion in seven projects last year.

He also said there is no immediate plan to enhance the authorised capital of the Bank.

“We have an authorised capital of $100 billion with initial paid-up capital of $10 billion from each of the members over the next seven years. That will take us a few years to leverage,” he said.

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