Any credit slowdown due to the big bank mergers can be averted if the managements execute perfectly the integration, State Bank of IndiaNSE 1.75 % chairman Rajnish Kumar tells Saloni Shukla and MC Govardhana Rangan in an exclusive interaction. Mergers will give banks the necessary economies of scale, decision-making bandwidth, and speed up resolution of bad assets and approval of large-ticket loans, he added. Edited excerpts:
The theme for the SBI conclave this year is on the role of the knowledge economy in taking India to the $5-trillion mark. How do you see the banking system contributing to that goal?
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If India must become a $5-trillion economy, we have to achieve a certain level of productivity improvement. That can only come if we make full use of the latest technology. If you look at technology and banking, there are huge opportunities to build scale, the industry is adopting robotics, artificial intelligence … everybody is on the digital platform today. Banks being financial intermediaries, we must align with what the real economy wants.
India reported a 25-quarter low rate of GDP expansion. How do you see the situation on the ground?
If we see the automobile sector, today I read Kia Motors reported very good numbers … that sector is going through a lot of churning. There are issues around environment, change in public mindset, aggregators coming in where you book a ride and there is no worry with ownership. The NBFCs also witnessed a huge slowdown in lending … all these factors have come at the same time. We don’t know how much of this is cyclical and how much is structural … but October and November are two very crucial months for the economy.
The government has merged 10 banks into 4 … critics say this could lead to a further credit squeeze. What is your assessment?
Suggestions to consolidate PSU banks were given more than 25 years ago; this had to be done. Whenever it happened people would say it’s not the right time. I would like to know when was the good time to merge these banks? If there is a strong execution team, then any credit slowdown can be taken care of. We need to be careful of the entity that gets merged into the main bank; it should avoid slippages and the monitoring should not be lax. The biggest issue is IT, human resource and customer integration; we need to protect customers coming into the anchor banks.
If we see the automobile sector, today I read Kia Motors reported very good numbers … that sector is going through a lot of churning. There are issues around environment, change in public mindset, aggregators coming in where you book a ride and there is no worry with ownership. The NBFCs also witnessed a huge slowdown in lending … all these factors have come at the same time. We don’t know how much of this is cyclical and how much is structural … but October and November are two very crucial months for the economy.
The government has merged 10 banks into 4 … critics say this could lead to a further credit squeeze. What is your assessment?
Suggestions to consolidate PSU banks were given more than 25 years ago; this had to be done. Whenever it happened people would say it’s not the right time. I would like to know when was the good time to merge these banks? If there is a strong execution team, then any credit slowdown can be taken care of. We need to be careful of the entity that gets merged into the main bank; it should avoid slippages and the monitoring should not be lax. The biggest issue is IT, human resource and customer integration; we need to protect customers coming into the anchor banks.
