Deepak Parekh, former Chairman, HDFC
| Photo Credit:
Gunasekar K S
The banking sector needs new reforms and large banks to fund the ever-growing needs economy. Deepak Parekh, former Chairman, HDFC said the Indian banking sector needs new reforms and the time to do this is when the sun is shining or when the banks are at their strongest.“We have all been advocating that India needs few large banks rather than many small banks. The public sector banks have already consolidated, but there merits a case for further consolidation,” he said, addressing the 118th Annual General Meeting of Indian Merchant Chambers in Mumbai on Monday.Gross non-performing loans of banks at under 2 per cent is a multi-decade low. Capital buffers are adequate. High frequency indicators in the first two months of the financial year suggests a sustained economic momentum. Manufacturing capacity utilisation at 75.6 per cent currently reflects an expansion mode, supported by growth in new orders and stable inventory levels, he said.India needs to move out of its legacy policy frameworks and need bold measures like adopting cross border securitisation transactions, having deeper credit default swap markets, more credit enhancement mechanisms, a thriving municipal bonds market and of course, the need for a more diversified investor base, he added.India’s corporate bond markets need to double from 18 per cent of GDP currently to meet the country’s investment needs, said Parekh.Despite foreign portfolio investors selling shares worth $50 billion, equity markets have remained resilient due to domestic institutional investors – particularly the SIP inflows of mutual funds of about ₹30,000 crore each month, he said.“What holds India in good stead is that its market capitalisation is well diversified, rather than dependent on two to three key stocks, as we have seen in some emerging markets like Taiwan and South Korea,” said Parekh.Future GrowthIndia’s future growth will rest on the quality of governance of its institutions, both the public and private sector. The premium on good governance, transparency, abiding by the spirit of law is non-negotiable, he said.Much work is still needed to unclog the long pending judicial cases, now estimated at over 5 crore. Land acquisition needs to be simplified and taxation regimes need better clarity and consistency.India faces a housing shortage estimated at 30 million units just over the next 5 years, while the annual supply of homes is about 6 lakh units.Quoting a UN report on urbanisation, he said India is building more than ever — but less and less of it is for the people who need it most.“We need more aspirational homes for India’s rising middle class. What we have today is a huge skew towards luxury housing,” he said.Published on June 29, 2026
