Rise In Unsecured Small Ticket Loans Not Alarming, Says SBI Chairman
The increase in credit risk weights has helped with the slowdown in retail unsecured credit, he said.
The rise in small-value unsecured loans with a ticket size of Rs 50,000 to Rs 1 lakh has been problematic because of new-to-credit customers, but it has not been alarming, State Bank of India Chairman CS Setty said.
“Banking industry is not into small value loans. Mainly NBFCs and MFIs are in this space. In my opinion, its not that alarming. The increase in credit risk weights has helped with the slowdown in retail unsecured credit,” Setty said at the sidelines of Bengal Chamber of Commerce and Industry’s Financial Market Conclave.
The structural modification by the Reserve Bank of India to decrease the refresh timeline of credit bureau scores of a borrower to 15 days from two months has helped, Setty said at the panel discussion.
This shows that the RBI has ensured that data based lending is robust, he said.
In November, the RBI had increased risk weights on personal loans given by banks and non-banking financial companies and that of banks exposure to NBFCs.
The corporate bond market has to be deepened further with the household savings getting diversified and more money flowing into pension funds, insurance and mutual funds, Setty said.
"...One of the pain point was the corporate lending was done by banks but corporate bond market still has to get strengthened. These financial players were also significant in mobilising household deposits," he said.
"These financial institutions have to come to the corporate bond market to further deepen it."
Speaking of cash management, he also said that banks' current account savings account will further go down if there is no proper cash management by the government.
"The pre-Covid-19 CASA level was 40%, whereas it was 45% post Covid-19. It may further go down if the government cash management comes in the picture. But my reading is that the number of small businesses still have to be formalised in the banking system," Setty said.
Small owners may be keeping cash with them, but the services are not reaching them, so the system should look at innovation from that aspect, Setty said.
"We believe that our CASA ratio will remain protected at this level. The judicial and conventional sources of current account will change. The government is trying to adjust the cash management. The conventional ones will not be available to us. We need to see how to reach the small shopkeepers and then bring the CASA," he said.
