Business Economy 22 Aug 2016 No bubble in retail ...

No bubble in retail loans: SBI chief on Rajan remarks

PTI
Published Aug 22, 2016, 8:31 pm IST
Updated Aug 22, 2016, 8:32 pm IST
Outgoing RBI governor Raghuram Rajan had criticised 'banks' aggressive retail play at the cost of infra financing'.
SBI chairperson says people around 26.5 years of age are the ones who need loans to fulfil their aspirations.
 SBI chairperson says people around 26.5 years of age are the ones who need loans to fulfil their aspirations.

Mumbai: Within days of Reserve Bank Governor Raghuram Rajan expressing concerns on banks' aggressive retail play at the cost of infra financing, SBI Chairman Arundhati Bhattacharya today said there is no bubble-like situation in the consumer lending segment.

"I don't think we are in a bubble territory as yet, as long as we continue to maintain our good underwriting standards and also get the help of digital (tools), which will enable us to have an even better picture," Bhattacharya said.

 

She was speaking in response to a question on whether banks are heading towards a possible bubble in the consumer financing segment. 

Stating that there is a lot more that can be done in the retail sector, she said, "Retail loans to GDP (ratio) in our country is amongst the lowest in the emerging markets, at less than 10 per cent. In Malaysia, it is in 30-35 per cent and in developed nations it is still higher. I think we have still lot of uncovered space to grow."

Addressing the annual convention of the Indo-American Chamber of Commerce here, she said the median age in the country is 26.5 years and these are the people who need loans to fulfil their aspirations.

"Therefore, I think what is being done now is to fulfil those unmet demands," she said. Last week, outgoing Reserve Bank Governor Raghuram Rajan had raised concerns over banks, especially state-run lenders, shunning project loans and aggressively targeting retail borrowers.

Talking about the upcoming redemptions of FCNR-B deposits, Bhattacharya said it will put pressure on liquidity. "Some amount of liquidity will go out with the FCNR redemptions. So, it is important for us to have comfort on liquidity side," she said.

She said the RBI's stance of maintaining liquidity at neutral level is good and needs to be maintained. "I hope the new governor Urjit Patel will retain the stance (to keep liquidity at neutral)," she said. 

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