Speaking out against banks being ‘goaded’ to focus only on the retail segment, SBI chairman Arundhati Bhattacharya on Monday wondered who will do the job of infrastructure financing in the absence of development finance institutions (DFIs).
“Every other bank is now being goaded on towards the same model (of focusing on retail segment),” Bhattacharya said at a banking conference organised by industry lobby IMC here.
She also voiced her concern against the attitude of holding bankers solely responsible for creation of bad loans, saying lenders need to be empowered and not ‘rapped on their knuckles’.
Bhattacharya said, “We also need to understand that no matter what scenarios you guard against, there will be some scenarios that you have not thought of. But should that stop us from funding the growth of India?”
According to her, while the earlier development finance institutions such as IDBI, IFCI and ICICI and IDFC have been converted into banks, it is not commendable to advise banks to follow the retail model as it would leave a void in project financing.
She said while banks are being driven to focus only on the retail segment, it is not clear who will do the job of infrastructure financing.
Bhattacharya explained that while India is still a developing nation, it needs lenders which will finance India’s growth. “We need to empower the banks to do it rather than rap them on their knuckles for having done it.” Mistakes have been made by all stakeholders and each stakeholder needs to make a deep dive to realise what were those mistakes to learn a lesson so that mistakes are not repeated.
Bhattacharya also spoke of the neglect meted out to regional rural banks and co-operative banks, which are already doing the same functions as the new differentiated banks. “As we talk about small finance banks, what is it that government machinery and the regulators are doing to make sure that existing banks is made ready for competition and then some hand-holding is provided to these new comers,” she said.
She said that risks from the payments banks and small finance banks has been “overplayed” and also questioned if their model can yet be called “viable”.
“Neither the payments banks nor small finance banks seem to have as yet devised a business model that can be said as viable,” said Bhattacharya, whose bank has tied up with Reliance Industries for a payments bank venture.
Referring to the Economic Survey, Bhattacharya said that one of the paradoxes of recent banking history is that the share of the private sector in overall banking attributes barely increased at a time when the country witnessed rapid growth and one that was quelled by the private sector. “It was an anomalous case of private sector growth without private sector bank financing,” she explained.