The Chairman of the State Bank of India (SBI), Dinesh Kumar Khara, has stated that the bank has no concerns about asset quality and expects credit growth in the industry to range between 14% and 16%. Khara expects the growth to come from an increase in corporate and SME credit, as well as real estate mortgage loans.
In an interview with CNBC-TV18, Khara discussed the recent regulatory actions taken by the central bank, stating that they are aimed at ensuring healthy growth in the banking system. He highlighted that the regulations are designed to prevent the system from overheating and that the Reserve Bank of India is looking for healthy growth in the system.
Regarding the impact on borrowing costs for NBFCs, Khara stated that the cost of borrowing has increased due to the increase in risk weights for unsecured loans. He mentioned that SBI has recently increased its marginal cost of fund-based lending rates to account for the additional impact.
Khara expects the industry’s credit growth to be driven by corporate credit, SME credit, and real estate mortgage loans. He noted that while there was a slowdown in the rural market in the first half of the financial year, there has been a reasonable uptick in the second half, indicating that there will be reasonable growth in the rural economy going forward.
When asked about the asset quality of SBI’s unsecured loan book, Khara stated that there are no challenges and that it is one of the best in terms of quality. He explained that the unsecured loan book is only extended to those who maintain their salary accounts with SBI, allowing the bank to have clear visibility of the salary credit in their accounts.
Overall, Khara remains optimistic about the industry’s credit growth and asset quality, while also highlighting the importance of incentives for savings in the upcoming budget.
