The comments come days after RBI Governor Shaktikanta Das had asked banks to be more forthcoming on lending, warning that excessive risk aversion can be self-defeating.
The banking system cannot be “reckless” in lending and repeat the mistakes of the past, a senior official from SBI said on Tuesday. Arijit Basu, a managing director at the country’s largest lender, also said banks will respond to the COVID-19 challenge and “reach out” to the customers. The comments come days after RBI Governor Shaktikanta Das had asked banks to be more forthcoming on lending, warning that excessive risk aversion can be self-defeating.
“As unlock happens, banks have to take the initiative, come forward and not shy away from lending. At the same time, it cannot be that banks go ahead and be reckless and come back to the same problem which the entire sector had been impacted just a few years back,” Basu said at a webinar.
Basu said the banking system has understood the need to be prudential and the necessity to have risk-mitigation measures in place. “All lending should be prudential lending, looking at companies which have a good business model, viable cash flows,” he said, acknowledging that all companies or projects cannot be well-rated and that is where the banks’ strategies come into play. Basu said there is a need for a dedicated development finance institution like IDBI and ICICI were, before being turned into universal banks, and added that the government is working on the same.
Speaking at the same event, Standard Chartered Bank’s chief executive for India Zarin Daruwala said COVID-impacted companies from sectors such as hotels, aviation and tourism will benefit through the newly launched loan restructuring scheme. If restructuring is done prudently, keeping in mind factors such as cash flows of companies and other aspects, it will be successful, she added.
Further, if the banks can present good packages, dedicated distressed asset funds will also get active on picking up assets once the restructuring exercises begin, she said. Daruwala also said there is a need for changes in the regulations governing external commercial borrowings.