The Indian banking system is in a Catch-22 situation — balancing between credit growth and bad loans, said Padmaja Chunduru, managing director (MD) and chief executive officer (CEO) of


Chunduru was speaking at a webinar organised by the Indian Chamber of Commerce (ICC) on quantitative easing and credit risk. “are in a Catch-22 situation. If don’t give credit, there is a risk of failure of organisations. If lend too much, lending might take a hit on the balance sheet. Credit quality is a constraint, and we have to look at ways to assess risks in an uncertain environment,” she said.



However, the immediate concern for bankers was to manage the present situation, she added. has 450,000 MSME customers who are eligible for loans guaranteed by the government.


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Chunduru’s views were echoed by Chandra Shekhar Ghosh, MD and CEO of Bandhan Bank. Banks are in a challenging spot as they need to balance credit growth with non-performing assets, he said. “Banks are in a very critical situation as on one hand they are required to assess the credit worthiness of customers, while on the other hand they have to balance it with credit growth.”


Credit growth should start picking up in the second quarter, said Ghosh. But, the biggest challenge would be to give credit to small enterprises which do not have any credit ratings.


While the schemes announced by the government to help the are good in intent, the key lies in administering the same, said Rajesh Kumar, MD and CEO, TransUnion Cibil.


“There needs to be a tight monitoring mechanism for assessing MSME’s cash flows and production cycles. We have created a Cibil MSME rank to provide risk differentiation,” he said.




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