Last weekend, bankers at grass-root levels across the country got into simultaneous workshops to come up with suggestions and solutions as to how public sector banks can align themselves with the government objectives—on credit delivery to various segments to aid growth, as well as issues like financial inclusion and other social sector objectives. This exercise would continue at district levels next week and finally the aggregated information would be analysed by policymakers, at the regulators-level perhaps next month. While it may energise PSBs, how it transforms the lending landscape and how quickly it translates into action on the ground is crucial.
The government has set an ambitious target of making India a $5 trillion economy by 2024. Economists have said that growth rate has to sprint from under 7% estimated for the current financial year to 9% annual growth rate to reach that target. Brainstorming at a conference in Mumbai, bankers and analysts have put the estimated credit growth needed for that kind of economic growth to be 18% to 20%. The latest data from the RBI showed an year-on-year credit growth of 12%. The country’s leading bank State Bank of India said it expects loan growth to be around 12 to 14% this financial year.
While the RBI governor asked bankers to look at the opportunities and not be overly pessimistic about the economic scenario, some have said the data points do suggest a gloomy situation. Retail loans that were growing fast have also slowed down, NBFCs that drove a lot of retail and home loans are in trouble, agriculture and MSME loans have seen higher delinquencies and the picture isn’t bright overall. A silver lining in all this is lower policy rates and some movement by banks to pass them on. But the government has to support the lower rate regime with some impetus to spur growth overall.