By EuAsiaNews,
Antwerp, Belgium : The head of India’s largest commercial bank, State Bank of India (SBI), has said that the global financial meltdown has not effected the Indian banking sector and that the Indian economy will continue to grow, at the most pessimistic forecast, at 7 percent plus.
“The Indian financial system including both the public and private sector banks in India including the foreign banks operating in India is one of the soundest banking system in the world today,” Om Prakash Bhatt, SBI Chairman told EuAsiaNews in an exclusive interview.
“It is largely untainted by the crisis which has overtaken the financial world and therefore there is no question of any of these banks getting any help for their capital. None of them have lost capital the way here in the West,” he said.
Bhatt was in the famous Belgian port city and centre of diamond trade to take part in a dinner reception to mark the 25th year of SBI operations in Antwerp held here Monday night.
Bhatt, however, noted that there has been a secondary effect on the Indian economy caused by the financial turmoil.
Whereas Indian economy has been growing in the last 4-5 years nine percent plus , part of the growth fuel for the Indian economy was provided by foreign investors, said Bhatt who has a long career of 36 years with SBI and held several important assignments in India and abroad including stints at the Bank’s London and Washington Offices.
He explained that as the institutions and economies in the western world started to falter against the financial meltdown, investors pulled or started pulling their money out of India and back into their countries because they were more required there.
“This pull back has been very sudden and very swift and tens of billions of dollars have been withdrawn from the Indian stock market,” said India’s top banker.
So the liquidity in the Indian financial system has become impaired and secondly because the valuation of the stock market had become less, hence it has become difficult for companies in India to raise capital from the stock market at the valuations that they were hoping, he said.
As a result expansion plans and growth plans are hurt. But the Indian state was quick to response. The Reserve Bank of India has actually put in several measures to restore liquidity.
“Today I am glad to say that the Indian market, particularly the banking market,is actually surplus in liquidity. So liquidity is no longer an issue,” stressed Bhatt.
He also referred to other concerns noting that Indian economy was rising on exports and export demand has come down particularly in the area of gem and jewellery, in the area of textiles and in the area of outsourcing particularly from the US and European countries.
Industries in these sectors are suffering from lack of demand and not from lack of liquidity or lack of technology.
“But all that has happened in India is that India which was growing at around 9 percent will after all this still continue to grow at the most pessimistic forecast at 7 percent plus” Bhatt told EuAsiaNews.
“We feel that between 6 months to 12 months when a new equilibrium has been established the higher growth rate should come back,” he added.
In his speech to the large audience of businessmen, diamond traders, bankers and diplomats attending the reception, Bhatt elaborated on the achievements of SBI calling it the “Safe Bank of India”.
The outgoing CEO of SBI Antwerp , N.S. Kujur , welcomed the guests and thanked Bhatt for being able to come to Antwerp on his fist visit despite the current troubled times.
On his part , Indian’s Honorary Consul General in Antwerp, Marc A. Huybrechts , noted in his speech that Bhatt was given the “Banker of the Year” award by Business Standard and CNN-IBN Indian of the Year for Business, both in 2007.