Banks will see a cut in interest rates in the third or fourth quarter of next fiscal year, Dinesh Kumar Khara, Chairman of State Bank of India (SBI) said in an exclusive conversation with Business Today TV Managing Editor Siddharth Zarabi at WEF 2024 in Davos.
The veteran banker said that inflation seems under control now and with RBI clearly decoupling its monetary policy from other global central banks, he foresees a cut in interest rates in the third quarter or fourth quarter of the 2024-25 fiscal.
The Indian banking system has demonstrated resilience in the past as the kind of practices that have been incorporated in risk management will go a long way in helping the system, Khara said in an exclusive conversation with Business Today TV Managing Editor Siddharth Zarabi at WEF 2024 in Davos
“The banking sector is a derivative of the economy. Since the real economy is doing well, it offers huge opportunities for the banking sector to grow. I think whatever bad lessons they learned in the past in the 2008 crisis, they have incorporated them well in the management practices,” Khara added.
He further said that as far as the international banking book is concerned, it constitutes about 12 per cent of the total balance and the bank has seen decent growth and repeat terms in the last one year.
“I think the inclusion of India into the JPMorgan bond index is a very welcome step. India is always in need of the foreign flows, and this has actually opened up a new opportunity,” Khara said.
On RBI’s move to tighten the unsecured credit growth, he said: “I would say that the structure was thought by keeping in mind that there should be healthy growth of the financial sector. And with that in mind, the unbridled growth, which was seen in terms of unsecured credit, was perceived to be very unusual. And I think the RBI's effort is a very well guarded effort because they always ensure that the system should not have any challenges.”
On NBFCs and fintechs trying to create a market share by giving loans, Khara said: “Actually the aspiration of the growing middle class is a reality in India. Availability of cheap credit at times can push people into the trap. Irrespective of the players, equally important is to ensure that those who borrow, they should have the ability to repay. I think if at all this golden principle is followed, it will lead to healthy growth in the credit.”
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