Lenders need to balance growth with prudence, says Arijit Basu

Speaking at a webinar organised by the IMC Chamber of Commerce and Industry on Tuesday, Basu said that while banks need to support businesses, they also need to have adequate risk-mitigation measures in place.

“All lending should be prudential by looking at companies which have a good business model, viable cashflow. All companies will not have the best ratings because when you are going in for project finance there is an element of higher risk, but then banks can lend after taking due care," said Basu.

Basu’s statement comes amidst similar views being expressed by several other senior bankers who believe they are being unnecessarily painted as risk-averse. Last week, Rajnish Kumar, chairman, SBI; Aditya Puri, managing director, HDFC Bank and Rajkiran Rai G, chief executive, Union Bank of India said banks are prudent, not averse to risk.

“As bankers, the responsibility on us is even more. We will have to ensure that we reach out to clients, new customers but at the same time have to ensure that we do not repeat mistakes of the past," said Basu.

According to him, one has to look at all the underwriting standards which primarily relate to how banks can assess the risk in a particular loan proposal.

“We need to understand why certain companies are in stress and as long as they are so owing to extraneous factors like covid-19, the entire banking community has risen to the occasion and supported all of them," he said, adding that even before the government schemes came, most banks came forward and lent additional 10% funds.

The RBI, Basu said, has given a lot of dispensations and has been quite wise and sagacious. “I am quite sure that banks will respond to it and make sure we lend to the right companies," he said.

Basu added that as the unlocking happens, banks have to take the initiative and not shy away from lending. “At the same time, it cannot be that banks go ahead and be reckless and come back to the same problems which impacted us just a few years back. This balance between the support to industry and the risk mitigation capacities is very crucial," he said.