Don’t expect huge credit pick up even after a rate cut: VG Kannan, SBI

In a chat with ET Now, VG Kannan, MD, SBI, shares his outlook for the RBI credit policy. Excerpts:

ET Now: Would you agree with that assessment because the only question is how low is low and how long is long enough? When does one ever feel confident in a world where I told you change is perhaps the only constant?

VG Kannan: Even if he actually reduces interest rates, I do not actually visualise a huge credit pick up. It might lead to a scenario of the bond market actually going up and to some extent the bankers being benefited, but overall, I do not see too much of a pass-through affect because most of the banks have already cut the deposit rates.

The best possibly could be a slight lowering of the interest rates. Whether that could lead to a credit pick up, I am not too sure and I would still say that Mr. Rajan possibly would do something in between the policies also. In case he feels that the inflation rate is more or less completely under control, then he might actually surprise us with the policy rate cuts.


ET Now: Would you agree that there are many promoters who are unable or unwilling to bring in a greater share? Take the case of Kingfisher Airlines. Is it that Mr Vijay Mallya is not in a position or he is not willing to bring in the money? In that case is it once again a case of taxpayers coming to the rescue of promoters who should perhaps be brought to book?

VG Kannan: First of all regardless of the particular individual, what I would say is in case the particular project is viable, there is a very strong case of putting some equity at the current market price or whatever be the SEBI determined price which is not unfair to the bankers. In the past, the pricing at which the conversion is to take place is to be so high that it was a total disincentive for any of the bankers to go in for equity.

However in the case where the particular industry is having a stress in the scenario where viability is an issue, then that is a different call to make.