Thu, 24 Nov 2022 05:21 PM IST
The Indian banking system is much better placed than the last cycle, and will be able to sustain the current round of high loan growth, State Bank of India (SBI) Chairman Dinesh Kumar Khara said on Wednesday.
Speaking at the SBI Banking and Economics Conclave 2022, Khara said learnings from the last cycle of high loan growth, which ultimately led to a huge spurt in sour loans have been internalised by the banking system.
Banks no longer stop just at insistence on equity, Khara said, but also look at the colour of the equity to ensure that hybrid debt does not masquerade as core equity. He stressed that banks are better placed from a loan underwriting and pricing of risk perspective.
In his note, Khara said the decision making is more scientific and banks are also well capitalised now, adding, "The banking system is much better placed … growth that we are seeing is sustainable too.”
The banking system, which had struggled to take the annual growth into double digits for multiple years, witnessed a credit growth of 17 per cent for the fortnight ending November 4.
Corporates are also deleveraged, unlike the last instance when their balance sheets had huge loans, Khara pointed out.
There are also changes in the ecosystem which are proving to be of big help to the lenders, Khara stated, pointing to strengths like bankruptcy code, Goods and Service Tax Network data, ratings ecosystem and credit bureaus.
The expectation is to grow the GDP to $40 trillion by 2047, which Khara termed as a "mammoth task". The focus is on infrastructure-led growth during this period, he said, adding that building this requires deep debt markets which are not present in India right now.
Khara said the country's banks and the alternative mechanisms like the GIFT City – Gujarat International Finance Tec-City – will have to play a significant role in the time ahead to help the overall growth.