Indian banks, especially those in the public sector category controlling two-third of the sector’s loan assets, have turned risk averse following a spate of large defaults by private sector promoters and entrepreneurs. This has adversely impacted investment and economic growth, Subramanian said Sunday evening while delivering Bandhan Bank‘s annual anniversary lecture.
“Leapfrogging public sector banks via fintech is essential. Private sector banks also need to invest in data analytics to figure out the model for large corporate lending,” he said, adding: “the banking sector needs to seize the opportunity to support growth of Indian economy.”
Banks internationally today are more like fintech companies than ever using data science and artificial intelligence in their dealing with customers.
“If Indian banks used data analytics in times of corporate lending, many defaults could have been avoided. If AI can design strategy and defeat Garry Kasporav in chess, it can surely defeat wilful defaulters,” the economic advisor said.
Banking sector credit growth considerably weakened during the first half of 2019-20, sliding down further to 5.9% by March 2020. It remained muted up to early June 2020 due to Covid-related disruptions.
Subramanian said that India’s credit penetration as a ratio of GDP remains low, despite being the fifth largest economy in the world. “We need to start evaluating ourselves in a global perspective,” he said.