Risk-aversion among businessmen, not banks: Dinesh Khara, chairman, SBI

bankers, state bank of india, RBI, Dinesh Khara, IBC, FinTech

(This story originally appeared in on May 26, 2021)

Dinesh Khara, the low-profile chairman of

State Bank of India

, is gearing up to meet the demand from companies and individuals impacted by Covid as he and his team seek to assess the impact of the second wave. In an interview, he tells TOI that companies have sufficient headroom in terms of unutilised credit facility to meet their requirement. Excerpts:

From an economic standpoint, how is the second wave different from the first?

Compared to the first wave, when GDP decelerated by over 23% in Q1FY21, we expect numbers to be significantly different this time. The other aspect is that lockdowns have happened at different points in time, which has ensured continued economic activity. The supply chain has got disrupted for industries, but some activities like construction have continued. Also, we have not seen the migrations from cities that were there last year, and living with Covid has become a new normal. We do not see much disruption for large corporates. It is largely in the trade and SME space.

Do these sectors need assistance from the government or banks?

The RBI has extended a restructuring option for borrowers up to Rs 25 crore. Our experience last year was that not many entities came forward for restructuring. Borrowers have also become cautious. Banks can take care of the funding needs of large corporates. The utilisation of working capital by corporates we finance is only 70%, which means they have headroom to borrow.

bankers, state bank of india, RBI, Dinesh Khara, IBC, FinTech

Demand is expected to be hit as citizens spend more on health. Do you expect that to affect SBI’s retail business?

At the moment, the priority for the middle-class is health. We have devised a scheme to take care of customers’ requirement in respect of Covid care, which includes hospitalisation. We have tried to keep it cheaper than our normal credit. As of now, it is available for our customers as we have some visibility to their behaviour. The loan amount will be linked to credit scores and we will launch it soon.

Will you also be lending to the healthcare sector?

We will be supporting the entire ecosystem relating to healthcare — hospitals, oxygen plants for hospitals and even oxygen manufacturers. We can also support non-bank finance companies that provide such loans to the healthcare sector.

Will your growth target be affected by the second wave?

We had credit targets but given restriction on mobility, we will have to wait and watch for things to normalise. Our growth will be an interplay of macro and internal efficiency. Our internal aspiration is to take the return on assets and return on equity to the next level. As far as internal efficiency is concerned, we will do our best to deliver value.

Is there still risk-aversion among lenders?

The government has taken several steps to restore confidence among bankers. There is no risk-aversion. When there is 30% under-utilisation in working capital limits and term loans have not been availed, the risk-aversion is on part of the entrepreneurs and not banks.

Have you achieved your goals on the digital front?

At the end of 2020, 59% of our transactions were digital. Today, they are at 67%. Digital is also 97% of non-branch transactions. We are leveraging analytics in a big way. We will be strengthening Yono (app) to improve customer experience and provide end-to-end digital products from account opening to extending loans. Of the 50,000 accounts being opened daily, 30,000 are end-to-end digital. Almost Rs 30,000 crore of business (loans) has been done using artificial intelligence and machine learning. We will further strengthen our capabilities here.

What about the rural area where SBI has a significant presence?

That is why SBI will continue to pursue ‘Phygital’. We are ramping up business correspondents to extend loans. The idea is to offer all commoditised products through the digital medium with branches providing value-added services. The formalisation of the economy has given us a significant tailwind. In the Jan-Dhan accounts, average balance has risen to Rs 2,800, which offers insights into their behaviour and enables lending to them.

How do you see the competition from


? Will Yono remain the super app?

I would not like to undermine what the startups are doing. We will supplement their efforts. We would like to have Yono as a super app because having more and more apps only confuses people. The intention is to make it richer and more robust.

Have you identified the assets to be sold to the new bad bank?

It’s in the works, but it should be around Rs 20,000 crore.

How do you plan to make SBI bigger and better globally and in India?

SBI is a replica of the Indian economy and will globalise with the economy. Our international operations contribute around 10% of the balance sheet size and will grow as the economy moves towards the $5-trillion mark, export opportunities will increase. We are showcasing our overseas operations as an Indian bank catering to global trade in addition to the primary focus on India. Besides upgrading their technology to improve products and services, we are optimising costs by offering back-office operations from India. We want to scale the penetration of mutual funds, insurance and credit cards and make it available to all.

What is the strategy for project finance in future?

It is not true that we do not entertain projects. Not many projects have come up for financing. Of late, capital investment has majorly been done by government entities and in the road and construction sector, which we have supported while the private sector is seeing low-capacity utilisation. Also, several companies have taken advantage of the liquidity in the system and raised equity and debt from the capital markets. Of our sanctions, disbursement is 70-71%. For banks, there is still room to lend as there are many companies without access to markets. Banks also have an edge when it comes to the stability of funding requirements.

Barring a few sectors such as steel, the realisation under insolvency process has not been good. How do you see it?

This is a paradigm shift. A whole ecosystem for the resolution of stressed assets is now in place. For a capital-deficient economy like ours, brownfield projects are always in demand. It is the value of the underlying asset which is helping determine the recovery rate for the system. Last year, since NCLT functioning was impacted due to Covid, banks started promoting settlements. There are various options available today for the resolution of stressed assets, IBC or the NARC process. All these will lead to some competition in terms of the ability of bankers to generate better value.

NBFCs are again saying they are under pressure. Does it warrant SBI intervention again?

Last year, we stepped in because the RBI came out with TLTROs (Targeted Long-Term Repo Operations). Currently, we may not have a risk appetite to go on our own. We will evaluate if the regulator introduces something.

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