The Indian banking sector, which saw credit growth plunge to a multi-decade low, could see some revival in the next three to five years, State Bank of India’s managing director of corporate and global banking B Sriram said on Monday. “In my take, in the next three to five years, the credit demand will grow, but the growth will be somewhere between flat and significant,” Sriram said at the FIBAC 2017 seminar in Mumbai. Growth in non-food bank credit improved to 8.42% year-on-year during the fortnight ended October 13, from 7.64% in the previous fortnight, according to the latest data from the Reserve Bank of India. In the year-ago period, the growth in credit was 9.01%. The outstanding loans to companies and individuals stood at Rs 78.52 lakh crore as of October 13. The corporate sector is likely to see an increase in revenues in the coming quarters, Sriram said, adding that the resolution of stressed assets would facilitate growth. “Today we have less demand in many sectors and that is why the capacity utilisation is lower than what we would have ideally liked it to be. The corporates would need to create demand and push credit growth in some way.”
However, he cautioned that in case the corporate and the micro, small and medium enterprises sector growth failed to take off, the retail sector would start to slow down as well. With demand for loans tepid in the corporate sector, the retail sector has been the focus for growth for many banks. “The MSMEs and the corporates will lead the next phase of credit growth, corporates largely because they are starting to correct themselves and the MSMEs on account of the various initiatives that the government has taken. So if these two sectors grow, the retail sector will continue to grow. For whatever reason, if it does not happen, then the retail sector will also start slowing down. It can’t outperform the other sectors by a large margin consistently over a large period of time,” Sriram said.
Earlier in the day, SBI chairman Rajnish Kumar said another challenge for banks in India is how they manage their liabilities. “On the asset side there is levelling of the spread. Also, disintermediation is happening faster. On the liabilities side, we have so much structural rigidity that we will have to find a quick solution to how we can handle that.”