It’s ‘Brutally Unfair’ That System Cannot Protect Common Man’s Savings, Says Deepak Parekh
Deepak Parekh, chairman of HDFC Ltd., speaks during an event (Photographer: Dhiraj Singh/Bloomberg)

It’s ‘Brutally Unfair’ That System Cannot Protect Common Man’s Savings, Says Deepak Parekh


Housing Development Finance Corporation Ltd. Chairman Deepak Parekh said it is “brutally unfair” that we have regular loan waivers and corporate loan write-offs but no financial system to protect the common man’s savings.

His comments come at a time when a scam at Punjab & Maharashtra Cooperative Bank has affected thousands of depositors with their money stuck with the lender as the Reserve Bank of India capped withdrawal limit at Rs 25,000 per account.

The restrictions from the RBI came in after it found the bank’s exposure to real estate developer Housing Development & Infrastructure was too much in excess of what the regulations allowed and also as the lender hid bad loans of group.

PMC’s exposure to HDIL is around Rs 6,500 crore, which is 73 percent of its loan book of Rs 8,880 crore, as per bank’s own admission.

“To my mind, there is no greater cardinal sin in finance than misuse of the common man's hard earned savings,” Parekh said without mentioning any particular incident while launching a Centre for financial studies by S.P. Jain Institute of Management and Research.

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
Deepak Parekh, Chairman, HDFC

He said trust and confidence are the backbone of any financial system and one should never underestimate the power of ethics and values.

“It is a pity that this is so often eroded,” he said, but was quick to add this problem crops up across the world. Calling for encouraging savings if credit were to grow, Parekh said the savings rate at 30 percent of GDP has been showing a declining trend over the past decade.

“Household savings is important for any economy and that is why there is likely to be a threshold beyond which lowering interest rates becomes difficult,” he said.

Our savers 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.

Talking about 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 is no other major economy that currently has the capacity to 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 are able to 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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