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Informist, Monday, Sep 2, 2024

 

--SBI Setty: Banks are getting confident in lending to MSME sector

--CONTEXT: SBI Chairman Setty speaking at Financing 3.0 Summit by CII 

--SBI Setty: Deepening of corporate bond market crucial for MSMEs 

--SBI Setty:Credit should be driven by entire fincl sector not just bks 

--SBI Setty: Need to develop skills for diversified lending ops 

--SBI Setty: Need to develop skills to tackle cybersecurity risk 

MUMBAI – The transition towards lending to micro, small and medium enterprises and the agricultural sector has not materialised as anticipated, though digitalisation and formalisation have changed the credit landscape, State Bank of India Chairman C.S. Setty said at a Confederation of Indian Industry conference today. 

 

"It should have moved to MSME and agriculture, but it did not happen because conventionally, these sectors were not too formalised and they had their own issues of credit absorption, which has dramatically changed post digitalisation and post formalisation," Setty said. "Formalisation and digitalisation has helped us to device models today to reach out to MSMEs which were not otherwise getting the formal credit." 

 

Setty, however, said that despite the progress, a substantial portion of MSMEs remains uncovered.

 

He said that MSMEs require key elements such as credit, governance, technology, and market linkage to thrive. While banks and financial institutions are growing more confident in lending to MSMEs due to greater formalisation, it is crucial to focus on enhancing credit absorption in these sectors, Setty said. 

 

"We keep talking about how deposits are not growing in the banking system, (and this) is going to impact credit growth," Setty said, adding that credit growth would probably be driven by the entire financial sector, not by banks alone.  

 

Setty said that the focus was now shifting from a banking-led economy. "It has been traditionally a banking led-economy...now the favour is getting converted to investors. The point would be now how do we bring this money, which is going to the pension funds, insurance, and the equity markets into capital formation. One suggestion could be deepening of corporate bonds."

 

The SBI chairman said it was crucial for non-bank participants such as insurance companies, mutual funds, and pension funds to engage more actively in the corporate bond market to ensure capital returns.

 

He said that the development of necessary skill sets within universal banks was important. "We need to continuously innovate in terms of delivering the product."

 

Financing activities, he said, require specialised skills, especially in emerging areas that demand future capital, and universal banks would have a crucial role in infrastructure financing. "While we expect that much of the capital will probably come from overseas and the domestic capital formation, universal banks, particularly large banks like SBI, would have to play important role in infrastructure financing. We have the largest product financing department in the country today, but despite our years of expertise in project financing, the skill set required to assess the emerging areas is still lacking."

 

Setty said the industry must focus on developing skills internally to address emerging risks associated with cybersecurity, as this was a critical issue that all stakeholders, including CII, must prioritise, especially as the push towards digitalisation continues.  End

 

Reported by Sachi Pandey

Edited by Avishek Dutta

 

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