Geopolitical tensions will not impact India’s growth story, and with a rate cut, credit demand will increase, said Amitabh Chaudhry, managing director and CEO of Axis Bank. In an interview with Saloni Shukla and Sangita Mehta, he said the entry of well-capitalised Japanese banks should not be a concern, and that while some individuals of the new generation would want to be on the investment side, new entrepreneurs will emerge. Edited excerpts:
Q: How do you envision the India story in FY26 against the backdrop of global developments?
A: Global economic growth is the weakest since the big recession. It is being driven by the tariff war and geopolitical tensions, which is resulting in uncertain policies. The investment climate has been aggravated and consumer confidence is at a lower level because people, when they see volatility they tend to postpone purchases. India is much less impacted by some of these global factors, and I think our key relationships across the world are working in our favour.
Q: Are you concerned that the next generation at top corporate houses wants to invest rather than build?
A: In quite a few families, the new generation wants to be on the investment side and have professionals manage the business. If you are on the investment side, you become a bit cautious on the business side. But new entrepreneurs will come in and replace them over a period. So, I am not worried that in some business groups, the newer generation is not necessarily involved in the business. If they stop growing, someone will come and replace them. I don’t think that we lack entrepreneurs and lack the hunger there.
In every sector, several new players have come over a period and created businesses out of nothing, and they are very large businesses. Indian entrepreneurship is a very strong story.
Q: Japanese banks are coming to India with deep pockets. How will it impact banks operating here?
A: Japanese capital is long-term, signalling strong confidence in India’s growth. From a competition perspective, they’e investing in small institutions — how these evolve remains to be seen. India is not an easy country to run a business in. I am not saying from a negative perspective. But to be able to grow extremely rapidly — much faster than what all of us are doing — is not going to be an easy thing to do.
Q: How do you see the impact of the rate cuts flowing through?
A: RBI lowered interest rates rapidly, signalling that it supports growth. In the next couple of quarters, it should feed through on the GDP growth side. As credit picks up, hopefully the growth projections will be upped a little bit this year. When credit growth comes back, deposit growth will also come back.
Q: How will this impact your net interest margins (NIMs)?
A: So, 70% of our loans are floating rate loans, which are linked to repo. There will be a negative impact on NIMs to start with, but interest rates (will) come off on the deposit side. Over a 12-month cycle, the margin should come back up. ( Axis Bank NIM for FY25 is at 3.98%).
Q: Do you see mobilising deposits as a challenge?
A: Banks are chasing deposits, as credit growth depends on deposit growth. With government funds parked at RBI and more money flowing into mutual funds, while it remains as a deposit in the system, it is coming to the banking system at a higher cost. Asset growth must follow deposit growth.
Q: On credit growth, are you seeing demand?
A: Yes, private capex is finally picking up, with projected investments of Rs 1.25-1.35 lakh crore —70% in infrastructure. But the environment remains uncertain and volatile. While some large groups are investing heavily in infra, most are cautious, opting for incremental investments. The problem is volatility, the bankruptcy Bill, the fact that I could lose my business, the fact that in this environment should I put large bucks (in business) as I did in the past is what they need to be cognizant of.
Q: Where do you see credit growth? Several major banks have brought down their projections for this year.
A: Credit and deposit growth rates have now converged, as sustained divergence wasn’t feasible. Deposit growth is expected at 11-13% in FY26. Wholesale credit demand is driven by five or six large business groups; smaller players aren’t investing at scale. Retail growth may return as the cycle stabilises and consumption picks up, with some banks signalling a rebound.
Q: Is that true for your bank as well?
A: Axis Bank is a bit cautious, as risk-taking demands clarity, real growth numbers which will impress you, I would say it is still a couple of quarters away.
Q: The criticism is that you are not growing at par with ICICI Bank. How do you address that?
A: Over 3-4 years, our growth matched ICICI’s; only in the last 2-4 quarters have they outpaced us. Our higher loan-to-deposit ratio (LDR), shaped by LCR norms and RBI’s worry that banks are growing fast, limited our pace. To reduce LDR, we had to sharply cut incremental lending. ICICI benefited from a stronger salary account base in a depositconstrained market. We’ve strengthened acquisitions, deepened relationships and integrated Citi to boost our deposit franchise.
Q: What is the progress on the proposed IPO of Axis Finance?
A: As per its growth plans, Axis Finance is looking to raise Rs 3,000 crore. We are in no position to infuse further capital because that is the commitment we have made to RBI. We have no option but to go to the market and try to raise the capital. We are running a process right now for that. With their rapid growth, they’ll soon hit the upper-layer (NBFC) limits, so we’ll follow all rules and decide on listing or stake sales when the time comes.
Q: Would you be interested in picking a stake in a microfinance company?
A: Yes, we’ll consider the right opportunity. Typically, companies we like are overpriced, while affordable ones have issues. For MFI businesses, caution is key — they’re entrepreneur-built and market-localised.
Q: What would be the biggest agenda for you, in this term? To become the second largest private sector bank?
A: The ambition is not reduced; it has not gone away. We have created a platform which can win. We are saying we can’t just become number two overnight. But there are businesses we have in mind where we want to continue to improve our position as number one or number two. And as that share increases, automatically the gap between us and the second player will reduce. It’s a long way to go.
Q: Another area of criticism is the attrition level in senior management. Can you address that? And why has the bank changed its audit chief?
A: There’s been some misunderstanding around the audit changes. Our former chief audit officer was a well-regarded banker, not a lifelong auditor. He got an opportunity internally within the bank. His replacement, an audit expert, joined but soon felt overwhelmed due to personal issues. He quickly admitted the mismatch, and we acted fast he exited within 10 days to avoid speculation. As for Rajiv Anand (deputy managing director), he had planned to retire. Some external opportunities may now be in play, but he has agreed to stay on as chairman of Axis Max Life, signalling continued association with the group
Q: How do you envision the India story in FY26 against the backdrop of global developments?
A: Global economic growth is the weakest since the big recession. It is being driven by the tariff war and geopolitical tensions, which is resulting in uncertain policies. The investment climate has been aggravated and consumer confidence is at a lower level because people, when they see volatility they tend to postpone purchases. India is much less impacted by some of these global factors, and I think our key relationships across the world are working in our favour.
Q: Are you concerned that the next generation at top corporate houses wants to invest rather than build?
A: In quite a few families, the new generation wants to be on the investment side and have professionals manage the business. If you are on the investment side, you become a bit cautious on the business side. But new entrepreneurs will come in and replace them over a period. So, I am not worried that in some business groups, the newer generation is not necessarily involved in the business. If they stop growing, someone will come and replace them. I don’t think that we lack entrepreneurs and lack the hunger there.
In every sector, several new players have come over a period and created businesses out of nothing, and they are very large businesses. Indian entrepreneurship is a very strong story.
Q: Japanese banks are coming to India with deep pockets. How will it impact banks operating here?
A: Japanese capital is long-term, signalling strong confidence in India’s growth. From a competition perspective, they’e investing in small institutions — how these evolve remains to be seen. India is not an easy country to run a business in. I am not saying from a negative perspective. But to be able to grow extremely rapidly — much faster than what all of us are doing — is not going to be an easy thing to do.
Q: How do you see the impact of the rate cuts flowing through?
A: RBI lowered interest rates rapidly, signalling that it supports growth. In the next couple of quarters, it should feed through on the GDP growth side. As credit picks up, hopefully the growth projections will be upped a little bit this year. When credit growth comes back, deposit growth will also come back.
Q: How will this impact your net interest margins (NIMs)?
A: So, 70% of our loans are floating rate loans, which are linked to repo. There will be a negative impact on NIMs to start with, but interest rates (will) come off on the deposit side. Over a 12-month cycle, the margin should come back up. ( Axis Bank NIM for FY25 is at 3.98%).
Q: Do you see mobilising deposits as a challenge?
A: Banks are chasing deposits, as credit growth depends on deposit growth. With government funds parked at RBI and more money flowing into mutual funds, while it remains as a deposit in the system, it is coming to the banking system at a higher cost. Asset growth must follow deposit growth.
Q: On credit growth, are you seeing demand?
A: Yes, private capex is finally picking up, with projected investments of Rs 1.25-1.35 lakh crore —70% in infrastructure. But the environment remains uncertain and volatile. While some large groups are investing heavily in infra, most are cautious, opting for incremental investments. The problem is volatility, the bankruptcy Bill, the fact that I could lose my business, the fact that in this environment should I put large bucks (in business) as I did in the past is what they need to be cognizant of.
Q: Where do you see credit growth? Several major banks have brought down their projections for this year.
A: Credit and deposit growth rates have now converged, as sustained divergence wasn’t feasible. Deposit growth is expected at 11-13% in FY26. Wholesale credit demand is driven by five or six large business groups; smaller players aren’t investing at scale. Retail growth may return as the cycle stabilises and consumption picks up, with some banks signalling a rebound.
Q: Is that true for your bank as well?
A: Axis Bank is a bit cautious, as risk-taking demands clarity, real growth numbers which will impress you, I would say it is still a couple of quarters away.
Q: The criticism is that you are not growing at par with ICICI Bank. How do you address that?
A: Over 3-4 years, our growth matched ICICI’s; only in the last 2-4 quarters have they outpaced us. Our higher loan-to-deposit ratio (LDR), shaped by LCR norms and RBI’s worry that banks are growing fast, limited our pace. To reduce LDR, we had to sharply cut incremental lending. ICICI benefited from a stronger salary account base in a depositconstrained market. We’ve strengthened acquisitions, deepened relationships and integrated Citi to boost our deposit franchise.
Q: What is the progress on the proposed IPO of Axis Finance?
A: As per its growth plans, Axis Finance is looking to raise Rs 3,000 crore. We are in no position to infuse further capital because that is the commitment we have made to RBI. We have no option but to go to the market and try to raise the capital. We are running a process right now for that. With their rapid growth, they’ll soon hit the upper-layer (NBFC) limits, so we’ll follow all rules and decide on listing or stake sales when the time comes.
Q: Would you be interested in picking a stake in a microfinance company?
A: Yes, we’ll consider the right opportunity. Typically, companies we like are overpriced, while affordable ones have issues. For MFI businesses, caution is key — they’re entrepreneur-built and market-localised.
Q: What would be the biggest agenda for you, in this term? To become the second largest private sector bank?
A: The ambition is not reduced; it has not gone away. We have created a platform which can win. We are saying we can’t just become number two overnight. But there are businesses we have in mind where we want to continue to improve our position as number one or number two. And as that share increases, automatically the gap between us and the second player will reduce. It’s a long way to go.
Q: Another area of criticism is the attrition level in senior management. Can you address that? And why has the bank changed its audit chief?
A: There’s been some misunderstanding around the audit changes. Our former chief audit officer was a well-regarded banker, not a lifelong auditor. He got an opportunity internally within the bank. His replacement, an audit expert, joined but soon felt overwhelmed due to personal issues. He quickly admitted the mismatch, and we acted fast he exited within 10 days to avoid speculation. As for Rajiv Anand (deputy managing director), he had planned to retire. Some external opportunities may now be in play, but he has agreed to stay on as chairman of Axis Max Life, signalling continued association with the group
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