Published On: 13, Dec 2017 | Source: business-standard.com
One key sector that emerged as the 'big' opportunity for the banking sector in the year 2018 was credit to the micro, small and medium enterprises (MSMEs) through the right employment of data analytics and other technological tools. Rajkiran Rai G, MD & CEO of Union Bank of India, said, "what we will see in 2018 will be primarily in the MSME sector. Through use of the right data analytics and other tech tools, we should be able to approach these MSMEs and participate in their growth story. The banks that are able to manage their positioning and participate in the MSME sector's growth will benefit. MSMEs will provide 40% of job oppotunities," he said.
And what about tools like artificial intelligence (AI), blockchain? The SBI chief believes that conceptually it appears to be new, but the outlook is exciting and promising.
Former RBI deputy governor K C Chakrabarty said he believed NPAs were the biggest challenge for the banking industry, while ICICI Bank MD Chanda Kochhar was of the opinion that technology and innovation were equally important and too much stress on NPA recognition was a cause for concern. How customers interact across the ecosystem and how banks become part of the seamless digital life of consumers is a big opportunity,"Kochchar said.
However, for SBI, the biggest challenge is not NPAs but their perception. "Yes it is, especially for PSUs. There is a perception that young people don't deal with public-sector banks. But 60% of my customers are between 25 and 40 years of age," Rajnish Kumar said.
There was also the notion during the discussion that the various issues that the private banking sector had faced over the past few years had impaired its ability to have good credit growth. Kochhar said she saw an uptick in credit growth going forward, in spite of deleveraging. "Credit growth was 5.5% earlier and it has reached 10% now. Retail growth is 16-17%. Corporate credit growth has shown an uptick," the ICICI MD said.
Have Goods and Services Tax (GST) and demonetisation benefitted the banking sector? The Union Bank MD said GST is going to bring about a change and the tax-to-GDP ratio will improve going forward. Chakrabarty,on the other hand, claimed banks had failed to take full advantage of demonetisation; they should have cut their savings bank rates to one per cent.
The SBI chief said the pace of opening new accounts had not gone down. "Savings bank is a big franchise for a bank like us. Even today, if I reduce the interest rate, nothing will happen. You cannot ignore competition. India does not have as robust a social security system as in Europe. We cannot ignore that. The elderly in India depend on our interest rates," he said.
The deciding factors for credit growth was also one of the topics at the round table. "Lower lending rate is just a necessary condition, but not sufficient for credit growth," Kochhar said. "Credit growth happens because of necessity, as spending and demand (for credit) increases. Credit growth will have to depend on macro situations around us. Credit growth totally depends on demand for credit, not necessarily rates," Kochchar said.
Is Insovlency and Bankruptcy Code one of the biggest reforms for the banking industry? Indeed, said Rajnish Kumar. "There cannot be a uniform approach across the industry as far as IBC is concerned," he said, adding banks should be given freedom and an administered regime mindset to decide rates.