The performance of Axis Bank, the third largest private sector bank in India, has been steady despite the multiple challenges that have plagued the banking sector over the past year — all thanks to its well-balanced loan portfolio and ability to manage growth and risk. In an interaction with Business Line , Shikha Sharma, Managing Director and CEO, said the sector is expected to turn around soon. She also believes that the domestic economy, which has seen lower than normal growth for more than two years, is going to enter positive territory. Excerpts:

Do you think the economy is finally showing signs of a turnaround?

We have seen a tough economic environment in the last 18 months. I have been in the financial services space for more than three decades, and this combination of low-growth high inflation, high interest rates and high indebtedness — all at the same time — is not something I remember having seen in that period . So, it has really been one of the most challenging times from a banking perspective. But, we are looking at two or three positives from the macro perspective. One, there is a lot of emphasis from the Government to take actions on the policy front which will hopefully result in unlocking some of the investments that are stuck and are unproductive. The management of the fiscal and current account deficits, over the last ten months, is also a positive. So, we think the worst is behind us. There may not be any change immediately. But in the next 12-18 months, we should see a more vibrant and stronger economy. And that’s what we are positioning ourselves for.

In terms of policy shift, what is it that you would like to see?

In the last couple of months, the Cabinet Committee on Investment has been clearing projects; just accelerating some of them may help. Many projects are stuck for (want of) clearances. No one is going to invest in infrastructure projects if so much money is stuck in existing projects. Neither entrepreneurs nor bankers have the risk appetite. There is a need for more transparency in policies, and they should be consistent. We need to continue to operate within some boundaries of financial discipline. If we do not have the money to splurge, then our development schemes have to be productive.

Is there any unfinished business in the banking sector that needs to be taken up?

One thing that (RBI Governor) Raghuram Rajan has done is to set up the committee on bank governance; that indicates clearly that he wants to see a different set-up for governance of banks — be it public or private sector banks. And, that’s important because you cannot have 70 per cent of the financial sector become weaker because managements are changing too quickly or incentives are low.

PSU banks need a lot of capital as well. So, that’s a piece of reform that needs to get done. Between the Finance Ministry and the RBI, they have to ensure that the PSU banks pursue growth while being financially strong.

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