State Bank of India Managing Director Arijit Basu
State Bank of India Managing Director Arijit Basu

At a time when the economy is facing challenges, banks should not solely focus on the retail segment as sluggish growth can impact this category of loans, a top banker said.

The country's gross domestic product declined 23.9 per cent in the April-June 2020 quarter, and analysts expect the economy to contract in double digit during the current financial year.

"A complete shift to retail may not be in the best interests because if your economy doesn't grow, even your retail at some point of time would get impacted," State Bank of India Managing Director Arijit Basu said at a virtual event organised by ET BFSI.

Basu said that going forward, there could be some changes in approach adopted by banks towards offering loans to various categories of borrowers.

"In MSMEs (micro, small and medium enterprises), for example, cash flow budgeting will be one of the things that will take forefront. There are banks that have used this model effectively in the past," he said.

According to him, in the retail segment, digital loans will become prominent in the case of personal segment customers.

In agriculture loans, most of the banks are taking help of technological developments to understand the needs of farmers and to link them to the marketplace, he said.

"Banks will have to adapt their own systems and processes to the ecosystem changes that are coming. The banks who do that better will succeed and continue to deliver good results, in terms of both being able to lend profitably and keep their balance sheets safe," he said.

Basu said 2018-19 and 2019-20 were the years of relative slowdown in the Indian economy.

"While there had been a slowdown, the view that had emerged among many bankers was that from 2020-21 onwards, it could be years of good economic growth coupled with good credit growth. But, now, that COVID-19 has hit us as on March 31, things have become even trickier," he said.

The measures taken by the Reserve Bank of India, including moratorium on term loan repayment, have given breathing space not only to businesses but also to banks, Basu added.

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