Bank credit growth is sustainable, says SBI’s Dinesh Khara

In September 2021, Khara highlighted the problem of mispricing in the business loan market when interest rates were very low. In August, he said the mispricings had come down somewhat.

“The lessons that we’ve learned from the last decade, where the last infrastructure story happened and where a lot of growth happened in power plants, that was the time when maybe capital own was nothing but hybrid debt,” Khara told SBI Banking. and Economic Conclave here.

For the fortnight ending Oct. 21, non-food credit grew 18.3% year-on-year against deposit growth of around 9.5%, Reserve Bank of India data showed ( RBI).

To that extent, Khara said, the lessons have been incorporated into the system, and banks these days see not only how much equity sponsors bring, but also how good it is.

“This time the (corporate credit) growth comes at a time when companies have already deleveraged. It also gives us confidence that the path we are on is sustainable,” Khara said.

Comparing the last credit cycle to this one, he said that before the insolvency courts were not there, and today the fear of losing control of their businesses has brought discipline to The promoters.

“The ecosystem, in terms of strengthening the rating system, Goods and Services Tax Network (GSTN), has provided us with credible data to better assess risk. The banking sector has the advantage of leveraging all of these ecosystems” , did he declare.

The banking sector has a fairly good pipeline of projects, which is as strong as about ₹2.5 trillion SBI, he said.

“There is demand; companies are ready to invest, come up with infrastructure and enable capacity building,” Khara said.

“As we speak, almost ₹2.5 to 3 trillion is the government balance with RBI that remains unspent. In November, we saw expenditure from the government, but it is only 15 days. Going forward, banks have a statutory excess liquidity (holdings) ratio and this will be used to ensure that there is no liquidity problem to meet the growth needs of the economy,” he said. he declared.