Kolkata: A State Bank of India official on Monday said banks need to operate on a lower net interest margin for the betterment of the economy.
Speaking at a webinar organized by MCCI, Deputy Managing Director VS Radhakrishnan said that lenders should develop the capability to work with NIMs lower than the existing 3-3.5 per cent limit.
“Working on low NIMs is good for the economy, although higher margins are certainly good for the banking system,” he said.
Radhakrishnan, however, said that banks have to set up the right eco-system to operate on low NIMs. “High credit costs are one of the reasons for higher margins,” he said.
He also said that lenders need to tie up with NBFCs and fintech companies to reach out to the non-banking sectors.
Radhakrishnan said low credit growth among large corporations is a cause for concern, as most companies are eroding balance sheets by accessing equity markets and selling non-core assets.
Asset quality is another concern for the banking sector as the real economy has been hit by the Covid-19 pandemic, he said.
“Rural demand has been hit due to the second wave and consumer sentiment is weak. Many people have lost their jobs too,” SBI Officer said.
Radhakrishnan said he expects the RBI to continue with its accommodative stance despite the threat of inflation.
“The central and state governments need to increase the demand,” he said.
Radhakrishnan said the infrastructure sector can be a big game changer for the economy and foreign investors should be attracted to invest in this sector.
Speaking at a webinar organized by MCCI, Deputy Managing Director VS Radhakrishnan said that lenders should develop the capability to work with NIMs lower than the existing 3-3.5 per cent limit.
“Working on low NIMs is good for the economy, although higher margins are certainly good for the banking system,” he said.
Radhakrishnan, however, said that banks have to set up the right eco-system to operate on low NIMs. “High credit costs are one of the reasons for higher margins,” he said.
He also said that lenders need to tie up with NBFCs and fintech companies to reach out to the non-banking sectors.
Radhakrishnan said low credit growth among large corporations is a cause for concern, as most companies are eroding balance sheets by accessing equity markets and selling non-core assets.
Asset quality is another concern for the banking sector as the real economy has been hit by the Covid-19 pandemic, he said.
“Rural demand has been hit due to the second wave and consumer sentiment is weak. Many people have lost their jobs too,” SBI Officer said.
Radhakrishnan said he expects the RBI to continue with its accommodative stance despite the threat of inflation.
“The central and state governments need to increase the demand,” he said.
Radhakrishnan said the infrastructure sector can be a big game changer for the economy and foreign investors should be attracted to invest in this sector.
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