“There is no greater cardinal sin in finance than misuse of the common man’s hard-earned savings”, Deepak Parekh said
Mumbai| Amid the Punjab and Maharashtra Cooperative Bank (PMC) crisis, HDFC Chairman Deepak Parekh said that it’s “brutally unfair” that we have a system for regular loan waivers and corporate loan write-offs but no financial system to protect the common man’s savings.
The PMC scam has affected lakhs of depositors as their money is stuck within the bank which they cannot withdraw after the RBI has put restrictions on them. They can only withdraw 25,000 in 6 months.
PMC’s exposure to HDIL is around Rs 6,500 crore, which is 73 per cent of its loan book of Rs 8,880 crore, as per the bank’s admission.
Deepak Parekh while launching a centre for financial studies by B-school SP Jain went on saying, “To my mind, there is no greater cardinal sin in finance than misuse of the common man’s hard-earned savings”.
He further added, “It seems brutally unfair that we have allowed a system of loan waivers and write-offs every now and again, but yet we do not have a robust enough financial system to protect the honest common man’s savings”.
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He added trust and confidence are the backbones of any financial system and one should never underestimate the power of ethics and values.
He said, “It is a pity that this is so often eroded,” but was quick to add this problem crops up across the world. Urging to encourage savings if credit were to grow. Parekh claims the savings rate at 30 per cent of GDP has been showing a declining over the past decade. Household savings are important for any economy and that is why there is likely to be a threshold beyond which lowering interest rates becomes difficult”.
Our depositors prefer assured returns which is why fixed deposits continue to remain the preferred choice of savings, he added.
He said the crux of the problem with the financial sector is that the flow of credit to the commercial sector is still clogged.
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Talking about the economy, he said given the global slowdown, our growth rate is still better. “Yes, we are facing short-term challenges, particularly on consumption growth, but these appear to be cyclical and not a deep-rooted malaise.
Parekh said there was not a single large-good quality commercial property, which is without a tenant. “Back-office operations, IT services, and software development have all seen huge growth. At new places in Hyderabad, a company is occupying 1 million square feet. It is because of the good infrastructure that foreigners are coming,” he said.
“There are two things India needs critically from world capital and oil. About 30 per cent of bonds issued by governments and companies globally are trading at a negative yield. The amount is about $17 trillion. It makes sense for India to seize the opportunity to attract much more global capital,” he said.
Parekh added, “There is no other major economy that currently can absorb the scale of investments that India needs or has the growth potential that we have”.
“Market cycles are inevitable. But as long as we can self-correct, work towards financial sector reforms, bring in enabling policies, encourage true and fair entrepreneurship and have a stable rule of law, I think there is no reason to believe why India won’t retain its rightful place on the global stage,” he said.
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