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Given that many corporates have deleveraged their balance sheets and are cash-rich coupled with economic growth led by the asset-light service sector, former State Bank of India (SBI) chairman Rajnish Kumar said he has some reservations over near-term corporate credit upcycle.

Kumar was speaking at India Financials Conference 2021 hosted by ICICI Securities.

“It is still some time away," Kumar was quoted in a report by ICICI Securities.

Kumar is more bullish on renewable energy and road sector. Also, he believes healthcare investments will pick up. Push for housing, improved affordability and low interest rates will drive demand for mortgage as well. Government incentives in bringing down tax rates facilitate investment, and investment activity should pick up, he said.

“Opportunity for growth in India is immense. If India has to grow sustainably at 8%, capital investment required is $2.4 trillion by 2030. Pace of investment is yet to pick up, but banks will have to play a critical role in financing," he said.

According to him, as GDP grows at a faster pace in the post-covid era, financial services sector will be the key beneficiary as well as major contributor to the growth. He believes the sector is poised for growth and it has huge potential. However, sector valuation seems depressed compared to other sectors.

“Innovation and digitization is key theme for the Indian economy. In India, JAM trinity has driven innovation. With rapid adoption of digital payments post demonetization and amidst covid pandemic, digitization has exploded as reflected in volume of transactions," he said.

Push towards digitization from both government as well as the regulator has been key enabler of digital adoption, he said.

“Open banking and faceless banking may become the norm. Fintechs have a role as innovation is the mantra of growth. Bringing something to the table that no one has delivered will always give results. Thereby, fintechs are able to serve the markets not well addressed by legacy banks," added Kumar

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