Bank recapitalisation plan and higher public spending on infrastructure will help stimulate private investments in Indian economy, says SBI chairman Rajnish Kumar
New Delhi: State Bank of India (SBI) is exploring ways to expand loan growth to sectors such as railways, roads and renewable energy, which are attracting higher public spending, chairman Rajnish Kumar said.
India’s largest lender is also looking at investment opportunities in financial technology, or fintech, start-ups, Kumar said in an interview on Friday.
The recapitalisation of public sector banks, for which the government has announced a Rs2.11 trillion plan, along with higher public spending on infrastructure, will help in stimulating private investments in the economy, he said.
The state-run lender expects this to help small and medium enterprises, a major source of job creation in the economy, said Kumar.
Indian banks, he said, are also strengthening their risk assessment systems based on their past experience of failed projects they have financed. “Banks cannot stay away from financing projects. The methodology and the processes in risk assessment will undergo some change,” he said.
To decisively deal with the Rs10 trillion bad loans pile in the banking sector, the government has put in place a new bankruptcy regime and tribunals in addition to empowering the Reserve Bank of India (RBI) to nudge banks to take the lead in either turning around failed companies or liquidating them and redeploying capital. The high quantum of non-performing assets has become a drag on the banking sector, crippling its ability to finance new projects.
Economists said that although there is overcapacity in certain sectors and that the downturn in the investment cycle is still persisting, the policy measures taken will certainly help as the investment cycle changes for the better.
“There certainly is improvement (in investor interest) in select sectors like automobile, renewable energy and highways,” said D.K. Joshi, chief economist at credit rating agency Crisil Ltd.
SBI will continue to invest in adopting technology that will give it an edge in operations as well as access to new markets, although it may render some jobs redundant.
Kumar said the bank is “well entrenched” in the payment services space, with over 30% market share including in debit cards and e-wallets.
“We are in talks with many startups in financial technology sector where we are open to following a partnership model. If someone has invested time, money and brain power and if the opportunity is suitable, we have no hesitation in joining hands,” said Kumar.
SBI already has partnerships with some e-commerce platforms to provide working capital loans to those utilizing such platforms to sell products. It also has tie-ups with online taxi aggregators to provide loans to cab drivers quickly.
“We can either procure their technology, partner with them or invest in them,” Kumar said about opportunities in the fintech sector.
He also said that higher investments into highways and infrastructure will add more jobs in the construction sector. “What is probably not happening in a big way is (investments) in sectors where there is an over capacity,” he said, adding that investor interest is improving in the steel sector. The demand for steel and production capacity in the country are matched and faster economic growth will further boost prospects for this sector, said Kumar.
SBI will make its services more sophisticated by training front-line employees in technology, he said.
“There will be an intensive employee engagement programme,” he said.