The Hindu Business Line : ‘Meeting capital needs key concern for banks’

Hyderabad, Aug. 20 Meeting capital requirements will be a major challenge for commercial banks in the days to come, according to Mr Amitabha Guha, Deputy Managing Director, State Bank of India (SBI).

Delivering a lecture at a seminar on ‘Paradigm Shift in Indian Banking’ at the Institute of Public Enterprise here on Wednesday, Mr Guha said that due to the fast growth of banking and financial services, banks would need a lot of capital for expansion and technological upgradation.

“According to industry estimates, commercial banks in India will require capital of over $14 billion by 2010,” he said. On the structure and nature of banks, the SBI official said Indian banks were in the pink of health and there was no need for any concerns. “In terms of asset quality and capital adequacy, our banks are at par with the best across the globe,” he pointed out.

Driving GDP growth

The contribution of banks in driving the growth of Gross Domestic Product (GDP) from 1992 was phenomenal, he said, adding: “To a major extent, the GDP growth has been driven by the growth in credit portfolio of the banks. Further, there is a tremendous shift from lending to agricultural and allied industries, to the industries and services sector, in recent years,” he said.

Lending to the farm sector had come down from 46 per cent in 1970-71 to 38 per cent in 2007-08 while the services sector had witnessed an increase in lending to 63 per cent from 18.5 per cent during the same period. “This is a healthy trend and it is expected to continue further,” Mr Guha said.

Talent crunch

On the key challenges, Mr Guha said attracting and retaining talent would be a major task, especially for public sector banks. The Director of Institute of Public Enterprise, Dr R.K. Mishra, welcomed the guests.

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