SBI chief flays extra focus on retail, ignoring infra lending

Speaking out against banks being "goaded" to focus only on the retail segment, SBI Chairperson Arundhati Bhattacharya today wondered who will do the job of infrastructure financing in the absence of development finance institutions (DFIs).

"Every other bank is now being goaded on towards the same model (of focussing on retail segment)," Bhattacharya said at a banking conference organised by industry lobby IMC here.

She said the advent of digital banking is changing banks' asset book composition and "every single bank is now going more after retail model".

The chief of the country's largest bank said that erstwhile dedicated DFIs like IDFC, IDBI and ICICI have all turned into universal banks and with lenders staying away from lending to the infra segment, infrastructure developed might be hampered.

"If we, as a developing country, are only going to advice banks to follow the retail model, who then is going to do project financing? Are we content as a nation to stay where we are with no need for further infrastructure development?" Bhattacharya asked.

With infra lending contributing to a bulk of the bad assets, which has been a matter of great pain for banks, she said, "There will have to be lenders who will come on board to finance economic growth. We need to empower banks to do it rather than rap them on the knuckles for having done it."

She conceded that mistakes were made in the past on infra lending side, but underlined that everybody had done so and there is a need to reflect on the mistakes.

Her comments come within a fortnight of RBI saying it will allow differentiated banks like custodian and wholesale banks. The RBI has already issued in-principle licences to 10 payments banks and 11 small finance banks.

The country had many experiments with the wholesale banking model, with ICICI and IDBI being the first ones to branch out and get converted as universal banks. The latest to join the bandwagon is IDFC. Existing wholesale banks like IFCI are finding it tough to achieve growth.

Many industry analysts are not enthused with another experiment with wholesale banking unless the RBI ensures that the asset liability mismatch issues are technically resolved before letting new players in.