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MUMBAI : Bank balance sheets are in good shape now, and lenders are ready to participate in the next round of economic growth, said top bankers at the Mint Annual Banking Conclave.

Bank chief executives who participated in a panel discussion said the bad loan situation is under control, and banks have set aside adequate funds to cover against future delinquencies. While India’s retail credit growth continues to remain buoyant, the demand for corporate loans—tepid for quite some time now owing to deleveraging—is showing early signs of a pickup.

“Ever since the festive season, we are witnessing growth on the corporate side also. The credit-deposit (CD) ratio for all commercial banks, which was at an all-time low, has also started inching up," said Dinesh Khara, chairman, State Bank of India (SBI).

At India’s largest bank, Khara said, the CD ratio has improved by almost 4% in the last two months. The ratio represents how much of a bank’s deposits have been deployed as loans.

“I think the economy and the banking system have gone through quite a bit of turbulence in the past couple of years. We have seen the ups and downs, and in the current situation, I would say that the retail engine has continued to grow all this while for the last 20-22 months," he said.

According to Khara, the banking system has provided corporate loans very well. Moreover, on capital, all banks are very well capitalized and can support the growth ambitions of the economy, he said.

V. Vaidyanathan, chief executive of IDFC First Bank, said that during the pandemic, most banks raised lots of capital and many have over 15% capital adequacy and need credit demand to deploy it. He said that corporates witnessed strong cash generation and support from the bond, equity and external commercial borrowing markets.

“Even if there was a demand, there were so many ways of raising money (for large corporates)," he said.

However, as one goes down the pyramid, smaller companies do not have these borrowing options at their disposal, and they have to come to a bank. “The hits to the credit bureau, an indication of demand, is up 30% in the last three months. Basically, retail, small, medium and even micro-enterprises are showing strong demand," he said.

According to Rajkiran Rai G., chief executive of Union Bank of India, the banking sector has witnessed a strong rebound. “On the asset-quality side, it is much better than anticipated at the start of the pandemic, and we are almost at the pre-pandemic level in terms of collections. The health of the banking system is good, and asset quality is robust. We are prepared for the next round of credit growth," Rai said.

He said that banks have been leaning towards retail credit for the past few years. However, it is to be seen whether such a shift towards retail loans is a long-term change or not.

“If you look at where we were before the pandemic, most of the large corporate world was only interested in cash preservation because they had seen cases in Insolvency and Bankruptcy Code (IBC), resulting in large companies getting transferred, which they never thought would happen in their lives," said Hitendra Dave, chief executive of HSBC India.

Most of the large Indian corporates, Dave said, were overleveraged, and all boards had told them to preserve cash, not to do capital expenditure, and cut down on costs. But, on the other hand, banks themselves had capital adequacy challenges.

Sanjay Singh, chief executive of BNP Paribas India, said that the second oldest foreign bank in India witnessed its best performance in 2020.

“Nonetheless, when the pandemic hit, no one was ready, and the first couple of months were very tough for everyone," he said.

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