Not wise to shift entirely to retail lending for banks


The banking system should not shift its focus completely to retail lending as this segment, too, could go through in a shrinking economy, State Bank of India (SBI) handling director Arijit Basu stated on Wednesday. Even earlier than the Covid-19 outbreak, banks had begun to move towards cash flow-based lending to micro, small and medium enterprises (MSMEs) and digital lending to people. The pandemic has improved the trend, Basu said, speaking at an occasion organized using ET BFSI.

“My broad sense would be that this stability which has now come — at least for the bigger banks, which have a certain mix of retail, wholesale, corporate, MSME, agriculture — could extensively stay the identical. A whole shift to retail won’t be inside the quality interests because in case your economy doesn’t grow even your retail at some point in time might get impacted. that is my personal view,” Basu said.

Simultaneously, in each lending section, some fine developments will take place, Basu stated. As an example, in MSME lending, cash flow budgeting will occupy the centre level. In retail, digital loans become the norm. In Agri-lending, too, most banks are taking the assist of technological developments to understand the desires of farmers and how satisfactory they may be related to the marketplace. “The banks will have to marry their systems and methods to the ecosystem changes which might become. The banks which do this better will succeed and maintain to deliver good results, in terms of both being able to lend profitably and keep their balance sheets safe,” Basu said.

while banks are facing challenges amid an economic slowdown, they may be still in a higher place than before, having solved some legacy problems within the latest past. They have been cleaning up their stability sheets and those had been lots stronger as March 31, in comparison to three years in advance. They have got revisited their current processes, systems, and credit underwriting. “Irrespective of Covid-19, one of the things we understood turned into that if we want to exit and lend for working capital, cash float-based lending is much more seamless and much better to undertake than, maybe, the traditional stability sheet method,” the MD added.

He stated even amid the slowdown that had been observed during the last years, bankers had been hopeful of a pickup in FY21, accompanied by cleaner balance sheets. “But now that Covid-19 has hit us as on March 31, things have ended up even trickier. So, what we need to do is assess the effect of what the pandemic has done to the e-book that we all carry, that are the sectors which have got impacted and, I think, every bank has carried out that,” he stated.


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