PM Modi's Likely Return To Power, Good News For Investors - Amitabh Chaudhry, Axis Bank | Davos 2024

Well, India has been doing quite well as far as GDP growth is concerned. I think the first two quarters were better than expectations, and what we expect for this year is pretty healthy growth for India. I think that momentum will continue to the next year; maybe it could come down a bit, but still the momentum will continue. I think what you're referring to is the revival of private capex. Yes, we are seeing signs of some revival happening across various sectors. Earlier, I think people were a bit concerned about post-COVID, then we had the Ukraine-Russia thing blowing up, so there was global macro which was worrying people. The capacity utilizations now have reached a level where people have to start investing in capacity. We saw a lot of consolidation in various industries, and that story is also almost getting over. So now the entrepreneurs are willing to look at investing further for capacity addition. I'm not saying that's a barometer, but if you look at the kind of announcements made in Vibrant Gujarat in terms of what some of the large investors have gone and committed, the numbers are quite large. So it's just an indicator that things are reviving and moving in the right direction. I'm quite hopeful that with the current government dispensation, how they're going about things, how the regulator is managing inflation and interest rates, overall the economic outlook looks stronger.

Well, as you rightly said, there are a lot of elections around the world this year, India being one of them. If you look at the trends and some of the surveys, it appears that the current government will come back in power without too much of a problem. Again, one can only project, no one can predict what actually will happen, but the expectation is that in this particular election, the BJP government will again come back to power, and that gives a bit of stability in terms of planning for any kind of investment going forward. Global turbulence is a risk. There are problems coming up unexpectedly and it does impact overall sentiment. Interest rates globally are higher and expected to remain high for some time, though now for the first time the Fed is talking about decreasing interest rates. India's inflation has not gone away, it still needs to be managed, which means we'll continue to see interest rates at this level and tight liquidity conditions for some time. So yes, there are risks, but I think India has navigated and managed the list quite well, and I don't see any reason why we cannot do that going forward.

So, you know, we have a very proactive regulator, and the regulator is looking at the data and saying that loans of a particular kind, especially unsecured small amounts, they are seeing increasing risk. They are also seeing general exuberance around retail loans. They also want to ensure that customer conduct is proper, so all the steps they are taking on digital lending guidelines and generally customer conduct. So the RBI is obviously signaling to the market to be careful, be watchful. We are also watching the space quite closely. And if you are not going to bring down your loan growth and if you are not going to watch the risk in the unsecured segment, then we might impose more controls going forward. I think it is quite obvious and evident from the statements made by the Governor on a continuing basis over the last couple of quarters. So I do expect that banks and institutions will react to it. As I said, interest rates are expected to remain where they are for some more period of time. Deposit growth has been quite muted, so there is a scramble for deposits which puts further pressure on interest rates in the system. So yes, we are going through what everyone calls Goldilocks times. Banks' balance sheets have been really cleaned up, corporate deleveraging has happened, consumer sentiment is quite strong. Things can't go wrong, but it is in good times that things go wrong. So I think the RBI is also saying that in these times you could be making some mistakes, and while we are watching, you should also be watching your asset quality, your risk management framework, and your underwriting standards. That is something which all the banks, I'm sure, are listening to quite carefully.

Well, I'll be saying that a lot of the entities are lending money to customers who are already quite leveraged. So they are saying, why do you have to go after that customer segment? There are other customer segments where the need is genuine, where they are not that leveraged, and you can continue to lend. So tempering of growth by certain percentage points, whatever the number is, is not going to really impact the growth in the economy or lead to a situation where there'll be economic slowdown. I think it's a balance, and the RBI is trying to strike the right balance between growth, risk, customer conduct, and I think they are going about it the right way. So full marks to them as far as I'm concerned.

Well, you know, the government has a department which looks at privatization and divestment on an ongoing basis. Obviously they are watching the space very very closely. Wherever they have gotten the policy, they have divested some of the assets. But it's not easy to divest because in some cases the bidders are not there, in some cases regulations are coming in the way. So they are going about it at their own pace. They also don't want to act as a desperate seller, because the government has managed its finances quite well. So they will do it at the right time. Yes, the pace has been slower than expected, but a number of circumstances are playing here. Again, I do want to say that why should the government sell assets in a hurry? It's not that these institutions they are talking about will not survive if they are not sold. Some of the big assets which were draining money have been sold successfully. Air India is a good example of that. So, you know, I think it's something you don't need to worry about.

Well, you know, it's a combination of things. The bank needs to do one: firstly, work on our own platform and ensure that our platforms are as good as any other fintech in terms of customer journeys, product innovation, and whatever else typical fintech would do. Second, in many cases you don't need to acquire them, you can collaborate with them because they are addressing a market which maybe is not that large for you, or maybe they are providing a service which can be an add-on to what you are already doing, or maybe they have a customer segment that can add to your overall customer franchise. So collaboration and working in partnership with them is a second model. Third, yes, in some cases you might take a stake or you might buy them out because they have some technology, some element which is very important and integral to what you are trying to do. I don't think acquisition is necessarily the right way because does your bank have the ability to foster that kind of culture and continue to grow it over a period of time? So maybe taking a stake and planting a stake in the ground, assuring your fintech that you are with them, might be a better model. But it depends on what comes before you. So I'm just saying that it's not just an acquisition model; there are various other models, and I think every bank is exercising its right judgment in terms of which model they go for.

Well, you know, we are not in that business. And you know, LLM requires huge amounts of money and understanding. Yes, we have the data, but there are other players who are supposed to do that. Our business is banking. We would need to set up a separate company which will just do LLM, which is not why people are investing in Axis Bank. If they want to go and invest in some entity like that, there are enough of them out there. So I think they are investing in us to do our core business very well. Yes, we do need those models as we continue to invest in our business, which will help the proposition we take to our customers and make us more efficient. We already have a team which has been working on this for quite some time, and we will continue to invest in it even more as we go forward. We have already launched one use case for GenAI within Axis, which is more for internal employees. It's already been rolled out to 110 branches. You can ask any question about products, services, and things of that nature. We have been working for more than 12 months now, and we intend to take it to all our branches in India in the next 30 to 60 days. So we are working on it, we are working with a lot of partners on it, and we are hoping that they will continue to innovate so that we can get that benefit.

Well, you know, this is an interim budget, as you rightly said. So I don't think the L in-laws and H have come there... I think we expect the reiteration and the commitment of the government to stick to ensuring that the overall deficit is brought down in a staged manner, as they have been saying. I think they should stick to what they have been doing very very well. Otherwise, given the fact that the elections are coming in May, I am not expecting any large announcement. And I don't think anyone is... I'm sure they will come out, depending on who comes to power, with a full budget where there may be more announcements. Some expectations can be addressed then.

Thank you.