SBI Ex-Chairman on Corporate Entry into Banking, RBI's New Proposals
- 3 years ago
In a candid and wide-ranging conversation with Mitali Mukherjee, SBI’s former Chairman Rajnish Kumar said he was confident SBI had put it’s bad loan devils behind it, despite the impending stress that COVID would likely bring the financial system.
Mr Kumar said he was confident the bank would meet its target of credit growth at 8%. Refuting concerns voiced by Moody’s around the restructuring of the loan, he said the restructuring pipeline for SBI was not too large.
He also said the bank had provided 100% provisioning for NBFCs like DHFL. He said 36,000 crores of NPAs was the legacy amount for SBI and that had been fully provided for. He was also confident the Supreme Court’s decision to create a special dispensation for loans to thermal and gas-based power projects( about Rs.3 lakh crore worth) would not be a stumbling block for banks as the disbursement process to IPPs ( independent power producer) had been smooth.
On the Yes Bank merger, Mr Kumar admitted it was an event that was “ unforeseen just like COVID”. He also said while Yes Bank had been upfront while presenting their balance sheet to SBI, ahead of the merger, the pandemic has complicated matters.
Comparing the current scenario to 2018, the former SBI head said the situation was very different, COVID was not going to bring on the bad loan crisis of ’18, as banks had become far more prudent with regards to bad loans.
The central bank’s internal working group (IWG) recommendation of allowing industrial houses to float banks has come up for severe criticism from several including Former RBI Governor Raghuram Rajan and former RBI Deputy Governor Viral Acharya, where they have questioned both the timing and the dangers that lie in the move.
SBI’s former Chairman said these were very valid concerns, around the concentration of power and misuse of funds. There was also, he said, the very real danger of rules being put in place, but the execution by the RBI faltering.
“ The safest way is don’t do it. But the reality also is that India is a credit-starved country, especially at the MSME level. Can Corporates be allowed banking licences, where they are barred from lending in the corporate space, but can invest in the non-corporate lending space, like farm lending etc. ?” he said
Mr Kumar also questioned the expectation that corporates will rush into the banking space. “Banking is not a great business, the world over. And corporate banking is the most difficult, while also often being a loss-making business. No corporate will rush into the banking space in a hurry. “
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Mr Kumar said he was confident the bank would meet its target of credit growth at 8%. Refuting concerns voiced by Moody’s around the restructuring of the loan, he said the restructuring pipeline for SBI was not too large.
He also said the bank had provided 100% provisioning for NBFCs like DHFL. He said 36,000 crores of NPAs was the legacy amount for SBI and that had been fully provided for. He was also confident the Supreme Court’s decision to create a special dispensation for loans to thermal and gas-based power projects( about Rs.3 lakh crore worth) would not be a stumbling block for banks as the disbursement process to IPPs ( independent power producer) had been smooth.
On the Yes Bank merger, Mr Kumar admitted it was an event that was “ unforeseen just like COVID”. He also said while Yes Bank had been upfront while presenting their balance sheet to SBI, ahead of the merger, the pandemic has complicated matters.
Comparing the current scenario to 2018, the former SBI head said the situation was very different, COVID was not going to bring on the bad loan crisis of ’18, as banks had become far more prudent with regards to bad loans.
The central bank’s internal working group (IWG) recommendation of allowing industrial houses to float banks has come up for severe criticism from several including Former RBI Governor Raghuram Rajan and former RBI Deputy Governor Viral Acharya, where they have questioned both the timing and the dangers that lie in the move.
SBI’s former Chairman said these were very valid concerns, around the concentration of power and misuse of funds. There was also, he said, the very real danger of rules being put in place, but the execution by the RBI faltering.
“ The safest way is don’t do it. But the reality also is that India is a credit-starved country, especially at the MSME level. Can Corporates be allowed banking licences, where they are barred from lending in the corporate space, but can invest in the non-corporate lending space, like farm lending etc. ?” he said
Mr Kumar also questioned the expectation that corporates will rush into the banking space. “Banking is not a great business, the world over. And corporate banking is the most difficult, while also often being a loss-making business. No corporate will rush into the banking space in a hurry. “
Like our work? Click here to support The Wire: https://thewire.in/support
The founding premise of The Wire is this: if good journalism is to survive and thrive, it can only do so by being both editorially and financially independent. This means relying principally on contributions from readers and concerned citizens who have no interest other than to sustain a space for quality journalism. As a publication, The Wire will be firmly committed to the public interest and democratic values.
We publish in four different languages!
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If you are a young writer or a creator, you can submit articles, essays, photos, poetry – anything that’s straight out of your imagination – to LiveWire, The Wire’s portal for the young, by the young. https://livewire.thewire.in/
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