Great potential for banks in India: Chanda Kochhar

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Davos:

Dismissing concerns of high corporate debt exposures posing possible default risks to banks in India, top banker Chanda Kochhar has said loans have been mostly given for projects in investment phase and  leveraging won't appear high once companies start generating cash flows. 

Kochhar, MD and CEO of India's largest private sector lender ICICI Bank, also said the country's financial services sector, including banking, has got tremendous growth potential for the next few years.

Besides, she added, there will be great opportunities in the economy and its global linkages through Indian companies' overseas expansion activities.

"While there has been concern over high leverage in some segments of the corporate sector, the debt levels have to be seen in the context of the fact that many corporates are in an investment phase," Kochhar told PTI in an interview, at the the annual meeting of the World Economic Forum.

She said the companies' debt leverage would appear high only until the investments are completed and start generating cash-flows. "As the cash flows from the projects start, the debt levels will be sustainable and should moderate over time.

"What is important currently is to ensure that the projects under implementation get the necessary last mile
clearances and linkages to ensure that the assets become productive on schedule."

Asked about her outlook for the Indian banking and financial sector, Kochhar said: "First of all, I would say
that the Indian financial sector has tremendous growth opportunities over the next few years.

"The banking sector should grow at least 2.5 to 3 times the GDP growth rate, and the improvement in the GDP growth rate will drive growth in the banking sector.

"Secondly, India's growing global linkages, whether in terms of international companies investing in India or Indian companies going overseas, will provide a growth opportunity for Indian banks.

"Thirdly, the penetration of financial services in India is low and we can achieve significant growth by increasing this level of penetration."

She said the growth for the banking sector has moderated over the last two years, but a recovery in economic growth and in the investment cycle should support higher growth for the banking sector as well.

She added: "This should also help to address the asset quality challenges that have been seen in some parts of the banking sector.

"Other areas of financial services, like insurance and asset management, have been coming through a period of regulatory changes and should see higher growth momentum as they complete the process of adapting to the new environment."

Story first published on: January 27, 2013 15:03 (IST)

Tags: ICICI Bank, Chanda Kochhar, India, WEF, Davos

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