Big Indian bank sees opportunities in shadow loan
India's Biggest lender is hoping to capitalize on the country's shadow banking crisis by building its mortgage and small business loan book as the non-banks are forced to pull back.
State Bank of India, which is slowly emerging from a period of massive provisioning on loans to large corporates like Essar Steel India Ltd., sees opportunities in taking business from the shadow banks without creating new asset quality problems.
India's shadow lenders had been under pressure since last year when a chain of defaults by Infrastructure Leasing & Financial Services forced the government to intervene and exposed weaknesses in the sector. The crisis has forced non-banking financial companies to sell assets and restrict new loans, allowing state-owned lenders to claw back market share they have lost over the past decade.
According to Chairman Rajnish Kumar.
"We are not moving away from any business, but that does not in any manner mean that we are going to lower our underwriting standard," Kumar said in an interview. "And I believe there is enough business that meets our underwriting standards."
Kumar said SBI's substantial capital gives it the freedom to seek more mortgages and small business loans, which had been a focus for the NBFCs before the crisis erupted. That should help the bank attain its target of 11% loan growth for the year to March 2020, Kumar said, slightly lower than the 12% growth of the previous fiscal year.