Corporate Credit Growth A Matter Of Concern, Says SBI’s Rajnish Kumar
The situation, he said, has prevailed despite the government’s measures to stimulate economic growth from a six-year low.
The chief of India’s largest lender expressed concern at “muted” growth in corporate credit despite the government’s measures to stimulate the economy from a six-year low.
“Corporate credit growth is a matter of concern and offtake is very muted as of now,” Rajnish Kumar, chairman of State Bank of India, told Bloomberg TV in an interview. “However, we hope to grow our corporate credit book as October to March is a busy season.”
That comes as bank credit growth remained subdued in the latest fortnight despite the government’s efforts to ease access to finance through loan fairs. Net bank credit in the fortnight ended Oct. 11 grew 8.84 percent, according to data released by the Reserve Bank of India. That’s little unchanged from 8.79 percent in September.
Yet, lenders—private and state-run—have done “relatively much better” than the previous year, Kumar said. “The (banking) system is slowly coming out of difficulties but to say everything is hunky-dory would be over-optimism.”
On Performance-Linked Pay
The central bank’s tweak of compensation rules for top executives at private banks may impact their decisions and doesn’t directly affect state-run lenders, according to Kumar. The norms include doing away with guaranteed bonuses and penalties in the case of divergence between bad loan assessment of the bank and the regulator.
“But I’m praying that they don’t become too risk-averse,” he said. “Otherwise, it will impact credit availability and the entire burden will fall on public sector banks.”
Other Highlights:
- The economic slowdown has bottomed out; things may get better from here.
- SBI has performed better both in terms of business growth and operating profit.
- Year-ended March 2018 was the worst year for banking sector in terms of bad loans.
Watch the full video here: