State Bank of India (SBI) Chairman Rajnish Kumar has said the outstanding bank credit need to be doubled from current Rs 95 lakh crore in the next five years if India wants to achieve $5 trillion GDP size. He was speaking at the Indian Banks Association's (IBA) high power CEO panel discussion.
G Rajkiran Rai, MD & CEO of Union Bank of India added that the $5 trillion economy meant an average credit growth of 15 per cent per annum. The credit growth is currently struggling because of lower demand and capacity utilisation and asset quality issues. "The banking industry has to improve its lending model by the use of technology," said Rai, while adding that infra financing would play a key role in achieving 15 per cent credit growth target. The high credit growth is something the Indian economy achieved during 2005-2008 period. "We have achieved this kind of high growth in the past and we can achieve it," says Kumar.
According to the SBI chief, the other enablers or preconditions for banks to achieve higher growth is to continue making profits; availability of capital; improvement in governance; and credit risk framework. He also listed out the role of other players like states, in supporting the economic growth.
CHSS Mallikarjuna Rao, MD & CEO of Punjab National Bank, said the government's decision to consolidate PSBs to create larger banks would help in contributing to the $5 trillion economy. "The bigger merged entities would be in a better position to create a better compliance culture and also risk governing framework by using technology," said Rao.
Sunil Mehta, Chief Executive of Indian Banks Association (IBA), said the bankruptcy code had created a new culture and discipline in the lending market. "This is one law which has been amended quite a few times to make it workable," says Mehta.
Mrutyunjay Mahapatra, MD& CEO of Syndicate Bank, talked about technology's role in banking. "The digital banking and technological tools have become more of a basic hygiene in banking globally."
Rai of Union Bank said payments through UPI or Unified Payments Interface were already expanding as customer adoption due to its user friendliness was fast. "Fintechs are also playing a role in the banking industry. They can add value," says Rai.
Madhav Kalyan, CEO at JP Morgan Chase Bank, said the domestic savings won't be able to support a growth of 11-12 per cent to achieve the $5 trillion economy. The government is already encouraging foreign capital, he said. "We will need a sound infrastructure like seamless clearing and settlement system, fraud filters, cyber security, payment systems like blockchain, etc," he added.
PNB's Rao said the country should focus on domestic consumption requirements rather than consuming through imports.