Though there is no interference from the government in public-sector banks' lending decisions, there are other compulsions that we face being the biggest lender in the country, SBI Chairman Rajnish Kumar said at the Business Standard Banking Forum 2019 in Mumbai on Friday.
"There are certain areas where the private sector has the freedom to choose where they want to do business. We don't have that freedom. It's not about any pressure being exerted; it's a different kind of obligation," the SBI chief commented while participating in a panel discussion with HDFC MD Aditya Puri.
At the special session 'The Great Indian Banking Conundrum', Puri said the worst for the banking sector was now behind and there was no systemic risk in India's financial services system. Some bad-loan issues would remain, he said, adding that it was part of doing business. "Banks by and large have started to lend. They have the capability. We have recognised the problems, and acted upon them,” Puri said.
On the root cause of the liquidity problem facing the non-banking financial companies (NBFC) sector, Puri said these companies borrowed short and lent long. “If you do NBFC business and do it properly, it's good business. If you borrow at, say, 6%, and want to lend at 26%, that's not business; that's greed."
SBI’s Kumar said the NBFC crisis was because of an asset-liability mismatch. "It you want to make long-term lending, you cannot do that through short-term borrowing,” he said. On NBFCs’ access to funds, Kumar said: “It's not that NBFCs are not getting loans. We are lending to the deserving ones.”
On SBI’s credit growth for the year, he said: “We have said it will be 10-12% for this financial year. We stick to that projection."
Commenting on the single-biggest issue facing the Indian financial sector, in another special session, ‘Making sense of the current narrative of Indian Banking’, YES Bank CEO Ravneet Gill said it was trust deficit.
As for his bank’s strategy to wade out of the present situation, he said: "We are not thinking too much about retail-versus-wholesale business. There are many areas where there is demand for credit, those need to be tapped," he said.
Rakesh Sharma of IDFC Bank clarified that his bank was a “private lender with a special status”. But “we are, of course, covered by CVC guidelines. Our situation is challenging but not tough," he said.
Banking leaders are clear that they need to be careful not to get swayed by the recent sentiment going forward. Citi India’s Ashu Khullar said: "There is no plan as yet for local incorporation. Going to small towns and villages, or not, is not a challenge for us right now. I would rather be sedate in my growth approach than take the risk of burning my finger. We have been here for long enough. We will play to our strengths. There are medium-term opportunities that we will explore," he said.