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SBI chief nudges industry to borrow and invest, says no dearth of fund

He also said that the State Bank of India (SBI) is underutilising its loan sanction limits as there is not enough credit demand from the industry

Press Trust of India  |  New Delhi 

Rajnish Kumar, State Bank  of India Chairman
Rajnish Kumar, State Bank of India Chairman

on Saturday nudged the industry to enrich their borrowing capacity so as to boost investment in the economy, asserting there is no dearth of funds and most of the banks will be in a better position by March-end as far as stressed assets and non-performing loans were concerned.

He also said that the State Bank of India (SBI) is underutilising its loan sanction limits as there is not enough credit demand from the industry.

"If India has to achieve its goal of USD 5 trillion economy then it cannot happen unless there is investment in the economy. Today the outstanding banking credit is Rs 96 lakh crore. So for a USD 5 trillion economy, we would at least need to double it," Kumar said at the 92nd Annual Convention of industry body FICCI here.

He further said that it is a very good business opportunity for the banks.

The gross capital formation rate which is at about 30 per cent at present also needs to go up to at least 37-38 per cent, Kumar added.

Stressing that there is an adequate availability of funds with the banking system, Kumar said: "I don't find enough projects where investment is being sought. Our first indication is that we are the largest financier of projects, we have a very big team for project finance and currently it is under-utilised."

He said even if there are projects, those are mainly in solar, city gas projects and to some extent in roads sector.

"Last year, we did only two financial closures which can be said to be large tickets. One was HPCL refinery in Rajasthan where the project size is almost Rs 50,000 crore and the other was Mumbai Nagpur Super Communication Expressway where the project size is again Rs 50,000 crore and half of the money has come from the bankers.

"Other than that, I don't have a project where funding demand is more than Rs 2,000 to Rs 2,500 crore today. So I want to ask you (industry), where are the projects? And if there are no projects then how do I lend and to whom I lend?," Kumar asked the industrialists present at the convention.

The State Bank today has loan sanction limits of up to Rs 8 lakh crore, but the utilisation (demand) is of only Rs 5.5-6 lakh crore, the SBI chairman said.

He further said the industry keeps on complaining that banks are not lending and lenders are saying that "we are ready with funds, you are not borrowing".

On the Centre's infra development push, Kumar said, "When we talk about USD 1.5 trillion to be invested in infrastructure sector, there is an opportunity for everyone. I don't think government can meet more than 25 per cent of this requirement. So 75 per cent will still be an opportunity for investors as well as the banks and the foreign capital."


On NPAs and liquidity situation, he said banks now have become extra cautious in lending than they used to be earlier and the risks have increased due to defaults.

Talking about reforms such as IBC (Insolvency and Bankruptcy Code), Kumar said in the current scenario there is ample liquidity available and the recent judgement by the Supreme Court on Essar Steel will matter a lot.

"Many large ticket stressed assets are getting resolved and by March 31, we are going to be in a very good position as far as most of the banks are concerned where at least the NPA (non-performing asset) ratio and stressed assets hopefully will come down," he said.

"And in such scenario, the opportunities which we (SBI) are seeing definitely is infrastructure, consumer lending... There is apparently a demand slowdown, but still our housing loan portfolio, which is a large portfolio, (in that) we are still growing at 16 per cent," the SBI chief claimed.

Among others, unsecured loans (such as credit against salaries) are growing at 25 per cent and there is good demand from housing sector also, he said.

"For housing sector, geographies may differ, you may have problem in NCR but it is not all India problem. We may have some problem in some residential markets but office market is doing quite well in certain cites like Hyderabad, Bengaluru, Chennai, Pune, Mumbai, Navi Mumbai -- all these markets are doing well and we have seen huge investment interest from all the private equity investors," he added.

Replying to a question on lending to the telecom sector in the next round of spectrum auctions, he said, "For us lending for spectrum is completely unsecured. On paper, it is secured as the auction is to be done by government but practically it is totally unsecured."

"So in such circumstances, banks will have to evaluate carefully before lending to the sector as the probability of default is very high," Kumar said.

Nevertheless, at a time when India is witnessing a demand slowdown from consumers and slowdown in economic growth, he said the scenario is not "all that gloomy" as it looks like to be as the country is undergoing a transition phase due to ongoing reforms process.

Also "the mindset with which people do business, the way we live our lives, everything is undergoing a transition phase. I think we are undergoing through a pain due to this transition...the country is full of opportunities. That have not disappeared. So I think we should not be disheartened by the current scenario," Kumar said.

First Published: Sat, December 21 2019. 20:20 IST
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