With banks struggling to mobilise deposits, financial services players such as mutual funds, pension funds and insurance companies should participate in corporate financing, State Bank of India chairman CS Setty said on Wednesday.
“One of the major pain points in overall corporate lending has been that it was mainly done by banks, the corporate bond market still has to get strengthened,” Setty said at the Bengal Chamber of Commerce’s Financial Market Conclave. “These financial entities, which are also significant players in mobilising household deposits, have to come into the market and lend, deepening the corporate bond market.”
“A good portion of household savings is going into these funds,” Setty said. “Some of the future credit growth and funding will have to come from non-banking financial markets. Not only capital markets, but mutual funds, pension funds and insurance funds – I think they all have to participate in corporate financing.”
Setty said low-cost current account savings account (CASA) of banks may fall further due to efficient cash management by the government.
“The pre-Covid-level CASA ratios were at 40%, it rose to 45% after Covid. Obviously, it is going back to 40% and may further go down if the efficient cash management by the government comes into picture,” the SBI chairman said.
SBI’s CASA ratio stood at 40.7% as on June 30, down from 42.9% in the year-ago period.
He said banks are now more comfortable lending to the MSME sector due to formalisation of the segment and more data points becoming accessible.
“We have seen that small-value loans have problems, particularly personal loans ranging from Rs 15,000 to Rs 1 lakh. This is because many new-to-credit customers are accessing the market.” However, these issues have not yet reached at an alarming level, Setty said.