State Bank of India Friday’s Chairman Dinesh Kumar Khara said incorrect pricing of risk by banks is a reality in the banking sector and a source of concern.
“Wrong pricing of risk is still a reality of the system, which essentially becomes some lender’s anxiety about how to deal with stakeholders when the credit deposit ratio reaches a certain number. So I think this is the real situation. ” Kara said at an event hosted by the Bengal Chamber of Commerce.
He said banks have tightened underwriting standards, but excess liquidity in the system can push banks to mispriced risks. “Bankers have the temptation to lower the risk curve and misprice risk … we are starting to see this.”
However, he feels that there are no concerns about underwriting standards, as most banks have tightened their standards given their previous experience of poor asset quality and high levels of non-performing loans.
Kara said “green shoots” can be seen in certain sectors, such as commodities, steel and aluminum. There are many export opportunities in these sectors and people are taking advantage of them. Credit demand begins to recover as investment begins to flow into these sectors through the Brownfield or Greenfield projects, he said.
“We are beginning to see the driving force (of credit demand) from companies in the public sector, and some private sectors are also looking for new investment,” he said.
Regarding the bank’s retail portfolio, Mr. Kara said there was some stress at the end of the first quarter due to the blockade of the region. “But things have improved since the beginning of the second quarter.”
Mr Kara said the mortgage market is beginning to show signs of growth and banks are trying to capture the same, as several major banks are cutting interest rates on new mortgages.
According to Khara, India’s Reseve Bank could maintain the status quo of interest rates during the October monetary policy review. As you can see some green shoots at the forefront of growth, RBI We may refrain from increasing the rate.
“Inflation is primarily due to supply-side turmoil, and once addressed, inflation may not be as high as it was seen in previous policy decisions. Therefore, by readjusting the supply chain. If inflation goes away altogether, there may probably be room to keep interest rates at current levels and wait for growth to fully recover. At that point, central banks may consider readjusting interest rates. Maybe, but for now, interest rates should remain the same. “
Incorrect pricing of risk raises concerns: SBI Chairman Dinesh Kumar Khara
https://www.financialexpress.com/industry/banking-finance/mispricing-of-risks-cause-for-concern-sbi-chairman-dinesh-kumar-khara/2337286/ Incorrect pricing of risk raises concerns: SBI Chairman Dinesh Kumar Khara