We continue to grow our presence in India across all business lines: Deutsche Bank

The general expectation was that money would flow into people’s accounts and a boost would be provided to demand but that has not happened. We need to realise that we have limited fiscal manoeuvrability, but we think that the government will come out with another package in due course. A lot will also depend on how the stimulus is executed. Also, at some point, we will need to take a close look at sectors such as aviation that urgently require support. We cannot be looking to build 30 to 40 additional airports when no one is willing to fly. From a monetary policy perspective, I would expect that the RBI will further bring down the reverse repo rate and encourage banks to lend more to industry. The credit guarantees announced will also encourage banks to go out and lend. We actively lend to the MSME sector and would like to grow our retail loan book.

We are awaiting the guidelines, but I hope that this relaxation benefits only genuine cases, and we don’t have unjustifiable cases creeping in. Directionally, it is understandable that there is a need to do so, but we need to ensure that it is for the right reasons that we are giving businesses and individuals a chance to repay banks at a later date. However, the Covid-19 pandemic environment could mean that some businesses see their business models impacted on a permanent basis, and so we will need to allow for orderly consolidation in certain industries and segments to take place. For instance, we may not have as many restaurants in Mumbai any more as people choose to eat out less. Such factors also need to be thought through.

We continue to grow our presence in the country across all business lines – corporate banking, investment banking, retail banking and private banking. India is a Top 5 contributor to the Deutsche Bank group in terms of IBIT (income before interest and taxes), and it is the largest contributor to the bank’s APAC revenues. We have over $2 billion invested in our branch operations in India, and as the business has grown, incremental capital to support growth has always been made available to the India business. The management board of Deutsche Bank sees the India franchise as one that delivers exceptional value, and remains committed to supporting its growth. Our results for the year ended March 2019 were quite good. Our March 2020 numbers have not yet been published, but we will continue to report growth. We see a role for banks such as ours in a post-Covid environment where a lot of restructuring will be needed. We have been hiring in India and this year alone, we have hired over 300 graduates from campuses.

We have done our analysis. Our published numbers from last year show that we run a very tight credit portfolio and our NPA levels are quite low. They will, of course, go up, but not anywhere near levels that would give us any discomfort. After the moratorium period, we expect to see some delinquency in our retail book, which will be higher than in the past, but overall, we have a reasonably well-secured portfolio.

We have always been very clear about the target market that we want to work with. Right now, we see an opportunity to use the government support to help many of our customers. We are also open to extending liquidity support to NBFCs. We will grow our balance sheet but in a very prudent manner. We will be careful about where we deploy funds and we do see an opportunity to help companies rebuild. We have some proposals with us on the wholesale banking side that we are presently examining. If it makes sense, why not?

There is no doubt that India, like every other country, will witness a significant decline in GDP growth in the current financial year. Deutsche Bank’s own estimate is that the Indian economy will contract by 5.5 per cent in FY21, largely on account of the extended lockdown. While the RBI has taken a number of measures to ensure adequate liquidity is made available, the extremely high levels of liquidity in the financial system tell you that banks are reluctant to lend in the current environment for fear of adding to their NPA problems. The regulatory forbearance provided by the RBI will help banks provide liquidity support to corporates when cash flows from their operations have dropped significantly.

Our Global Credit Trading division, which drives our distressed asset financing business, is an area of focus that we remain committed to. Given our strong global expertise in this area, we are well-positioned to play a constructive role in working with companies with distressed debt to make them viable again. We are also working with and advising offshore investors interested in buying distressed debt.

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