DBS sees growth opportunity in NPA-saddled domestic banking

Singaporean lender DBS Bank sees capital constraints in bad assets-saddled Indian banking sector as an opportunity to grow in this strategically important market.
"As you go forward, the rest of the banking system is still likely to be capital-constrained for some more time and that should provide us competitive edge in the short-term to build a business," DBS Group Chief Executive Piyush Gupta told PTI.
He acknowledged that his bank, which pumped in Rs 670 crore in FY16 for recapitalisation, has also taken massive hit due to bad loans problem, making it difficult for domestic lenders to expand their portfolios in the country.

Asserting DBS' ability, which is the largest lender in its home market, Gupta said: "in the last couple of years, the capital was to clean up the problems of the past. As we go forward, the capital requirements will be growth-oriented, to support growth in risk assets and balance sheets."
It can be noted that a massive surge in bad assets, both due to difficult environment and an asset quality review undertaken by Reserve Bank, has led to concerns over ability of the banking system to support the finance needs of the economy, where policymakers want to accelerate the rate of growth into double digits in the medium-term.

At present, the India unit accounts for only 5 per cent of DBS Group's total asset book of SGD 458 billion, he said, adding the bank sees this share growing in the future. DBS India runs just 12 branches at present.

While funding requirements of large corporates will be a mainstay in the medium-term, it is also planning to develop the small business franchise with plans to open up to 70 branches here over the next five years, which will be possible once if it gets a licence to operate as a wholly-owned subsidiary (WoS) from the Reserve Bank, Gupta said.

It can be noted that DBS was the first operating foreign lender to go in for WoS and had accordingly applied for the same, but it yet to hear from the regulator.
Gupta said DBS sees problem in the mid-cap space with infrastructure players and will stay aware from supporting them, and also pointed out difficulties in iron and steel, and power sectors.
"We will continue to be large corporate bank. Our problems were never there, they were in the mid-cap space. We got to be thoughtful about target market there," he said.