In this round of stressed loans and debt recasts, lenders are concerned that the volume of retail assets seeking easier repayment terms will surpass corporates
Mumbai: Turning away from corporate loans to fully embrace the retail customer may not be a good choice for banks, State Bank of India (SBI) managing director Arijit Basu said, adding lenders may preserve the existing balance in their loan portfolio.
The balance of retail, wholesale, corporate, small business loans and agriculture, would broadly remain the same at least for the larger banks, Basu said at a webinar organized by ETBFSI.
“A complete shift to retail may not be in the best interests because if your economy doesn’t grow, even your retail at some point of time would get impacted. That is my personal view," said Basu.
Amid stressed loans and upcoming debt recasts, lenders worry that more retail borrowers than corporates will seek easier repayment terms. The pandemic and the ensuing lockdown have left millions of Indians jobless and crimped their ability to repay debt.
At India’s largest lender, SBI, retail personal loans formed 36.7% of total domestic loans as on 30 June, up from 34.4% a year ago.
Basu added that in each sector—retail, corporate, agriculture and MSME—there would be some developments. In micro, small and medium enterprise (MSME), for example, cash flow budgeting will be one of the things that will take forefront, said Basu.
“There are banks which have used this model very effectively in the past. In retail, I think digital loans will become a bread-and-butter thing to reach out to the personal segment customers. In agriculture, now most banks are taking help of technological developments to understand what is the need of the farmer and how best they can be linked to the marketplace," he said. Basu explained that FY19 and FY20 were years of relative slowdown in the Indian economy, witnessing demonetisation, goods and services tax (GST) and the formation of Real Estate Regulatory Authority (Rera).
“All these have had their impact. While there had been a slowdown, the view that had emerged among many bankers was that from 2020-21 onwards, it could be years of very good economic growth coupled with very good credit growth for the banks in a risk-mitigated manner," he said, adding that covid-19 has hit everyone and things have become even trickier. According to him, banks need to assess the impact of what covid-19 has done to their books and which are the sectors that have been impacted.
“This breathing time given by the Reserve Bank of India (RBI) in terms of the moratorium and other reliefs that were extended till 31 August was very good because it gave breathing time not only to the businesses; it also gave time to the banks to look at the approach that they would be undertaking from this month onwards," said Basu.