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Govt spending will revive private sector investment: Rajnish Kumar, SBI chairman

“There is an obvious slowdown in demand... it is visible in every sector,” Rajnish Kumar said.

Updated: Aug 05, 2019, 08.38 AM IST
Apart from economic factors there are issues like fear of getting accused by investigative agencies that have slowed loan disbursements by banks.
Government spending will be the engine that powers growth in the other sectors of India’s slowing economy, State Bank of India chairman Rajnish Kumar said in an interview. “There is an obvious slowdown in demand... it is visible in every sector,” Kumar said. “The major spending thrust will come from the government. Once that starts reflecting on the ground, I am hopeful that private sector investments will follow.”

The new project pipeline is satisfactory but mostly confined to a few segments such oil and gas as well as renewable energy and road projects that are backed by the government, the banker said.

India Inc has been looking to the government for a stimulus programme and help from the monetary authorities in the form of lower interest costs to overcome the slowdown that has led to growth falling to a five-year low.

Faced with a record slump in sales, automobile companies are cutting output and others are slashing costs, dampening consumer demand, which has been driving growth for the best part of the past decade.

“I believe the government may now be in a position to step up funding for the infrastructure sector as well as the tax sops and other measures taken to promote affordable housing should help the construction sector,” Kumar said. “I am hoping that as the festive season starts, there should be a pickup in demand in the auto sector.”

‘Stricter Norms the New Normal’
Kumar joins other CEOs such as HDFC Bank’s Aditya Puri who have cited the slowdown in economic growth. Housing Development Finance Corp. chairman Deepak Parekh last week blamed the risk aversion among banks toward giving loans as being one of the reasons for the weakness in demand.

But the SBI chairman said stricter norms are the new normal.

“We can’t be too liberal,” he said when asked about risk aversion. “In these times, it can’t be business as usual... we have seen the consequences. In each sector we have reviewed our policies and if clients conform to those policies bank credit will be available to them. Obviously there will be a tightening around the monitoring of funds which has become a big issue.”

Apart from economic factors there are issues like fear of getting accused by investigative agencies that have slowed loan disbursements by banks. In cases like Kingfisher Airlines and Infrastructure & Leasing Financial Services, investigators suspect that banks colluded to dupe the system.

There is a structural change in the way business is being done, thanks to the Insolvency and Bankruptcy Code (IBC) and the tightening of credit assessment by lenders, he said. At the same time, there’s fear of wrongful prosecution among bankers given the number of bank executives facing corruption allegations “We all support the objective to weed out corruption and irregularities,” said Kumar. “But when it comes to procedures or commercial decisions going wrong, then there has to be an understanding under which category such a case is treated. I have heard in news that in one case 250 bank officers have been named. That causes problems. I don’t see a situation where 250 bank officers from different lending institutions colluded to help one person divert funds. How is that possible? Are we taking this to the other extreme?”

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