Mr. Khara at an annual conference spoke about different issues including raising funds and co-lending
Mr. Dinesh Kumar Khara of the State bank of India chairman revealed that the banking sector needs capital up to $70 billion to support the different financial needs of the economy up to $5 trillion.
On Wednesday, in an annual virtual conference conducted by FICCI-IBA, Mr. Khara stated that the banking sector is very well-capitalized. To continue it, they need fresh capital up to $70 billion to satisfy the financial needs of the economy up to $5 trillion. India is now under an economy of $3 trillion, but the government is genuinely determined to develop India as a $5 trillion economy by 2025.
Banks have to pool the additional funds worth $70 billion to satisfy their financial requirements.
Additional Tier-1 bonds and debt instruments:
Mr. Khara also stated that banks should maintain a good relationship with the investing community and should be as attractive as they were in the past to the investing community. Banks should be ready to issue AT-1bonds (additional tier 1 bond) and debt instruments at a fairly reasonable price to support this kind of economic activity.
AT-1 bonds, in these returns, are payable from the bank’s present or past profits. AT1 bonds involve high-risk factors.
Speaking about the co-lending, Mr. Khara revealed that SBI has signed two agreements and entered into a partnership with those parties. SBI is looking forward to working on some more collaborations in the coming future to serve the financial needs and ensure efficiency in the bank’s portfolio. He also said that co-lending is an essential mechanism and is meant to be establishing the connections with the ground mile.
As India shares a broad geographical space, both physical and digital modes of financial services will continue here because banks serve a wide range of customers; some customers tend to digital services, but some prefer the physical method of services, so both modes of services will co-exist here.
To answer the most frequently and widely discussed topic- “SBI has 65% of its branches in rural and semi-urban areas, does it need any co-lending partnerships?” Mr. Khara said, “yes. We need co-lending partners to connect with the ground level; we create partnerships with those operating the specific area, more like a niche.
In those geographic areas, they have sufficient information (NBFCs and MFIs) regarding the lending and borrowing activities; this information plays a vital role in taking any critical decision. In the corporate lending process, Mr. Khara said that the bank is committed to continuing the financial activities with these large-scale corporate entities.
And also, the perspective of this process is witnessing remarkable changes as the corporate entities are now able to raise funds from the capital markets. As per Mr. Khara, in the last two years, nearly 2 lakh crores worth deleverage has taken place by the corporate segment.