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 an economics conclave organised by the country’s largest lender, 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.
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Banks do not stop just at insistence on equity, but also look at the colour of the equity to ensure that hybrid debt does not masquerade as core equity, Khara said, stressing that banks are better placed from a loan underwriting and pricing of risk perspective.
He said the decision-making is more scientific and banks are also well capitalised now.
“The banking system is much better placed-growth that we are seeing is sustainable too,” he said.
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 ended November 4.
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Corporates are also deleveraged, unlike the last instance when their balance sheets had huge loans, he said.
There are also changes in the ecosystem which are proving of big help to the lenders, Khara said, 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 USD 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 will have to play a significant role in the time ahead to help the overall growth.
