The handsome credit growth witnessed at present will taper down next year if deposit growth continues to lag behind, Axis Bank chief executive and managing director Amitabh Chaudhry said on Friday.
Chaudhry also advised some caution to be exercised by the system as it witnesses a high growth at present, saying decisions made today should not haunt 5-7 years down the line.
"… If the deposit growth does not continue, our projection says that credit growth can taper down in the next year," Chaudhry said, speaking at Business Today's Banking and Economic Summit here.
The bank's economists are projecting that credit growth will come down to somewhere around 12-13 per cent unless something happens on the deposit side, he added.
It can be noted that at present, the system is witnessing a credit growth of around 17 per cent, as against a 9 per cent growth in deposits, which has triggered what some bankers refer to as a 'war for deposits' in the system.
Chaudhry said the next 5-7 years look great for India.
"We have to play the role of a tiger in this aggressiveness and be willing to crouch when certain opportunities come with inherent risks," he said, hinting that under him, the bank wishes to displace larger rival ICICI Bank from the number two spot and also go ahead of HDFC Bank in the future.
Recalling a comment made by him when he took charge over three years ago, Chaudhry named ICICI Bank and said, "… I said I have not joined to remain number 3. I have joined Axis Bank to take this institution to a different level. Otherwise what is the point?"
RBI Governor Shaktikanta Das had recently explained that the two numbers look divergent because of base effects, pointing out that last year the deposit growth was higher than the credit growth, and maintained that the higher rise in loans cannot be termed as exuberant.
Apart from the base effects, Chaudhry attributed the higher credit growth to refinance and a shift to bank credit from other sources, and rued that corporations continue to be cautious.
"… that sense of gung-ho feeling which the media seems to be talking about, or people are saying 'oh, India … great things will happen', I am not seeing it yet. I think the corporates are still being very careful," he said.
Acknowledging that a more diverse set of sectors are witnessing investments at present, he said much of the capital expenditure is directed towards acquisitions or acquiring market share, and is not aimed at greenfield expansion which is desirable from an economic growth perspective.
"The tepid growth rate in wholesale (lending) has to take off at some stage, or the GDP growth will get impacted," he made it clear.
Axis Bank has stayed away from some corporate loan bets because they were not coming at the right price point which the lender considers from a risk perspective, Chaudhry said, adding that there are five-seven banks, especially some state-run ones, which are willing to price the loans lower as they chase loan growth.
"While we have cleaned up our act, in this desire and aspiration to grow all of us have to realize that today we might be making mistakes which would create not a new banking crisis, but create problems for banking going forward in the future," he said.
He further added that "being a banker, we always look at risk all the time. In my mind, we need to add a dose of caution to this feeling of euphoria."
