'India needs more credit to be developed by 2047'

India needs to extend the reach of credit in the economy to become a developed nation by 2047, even as companies increasingly move away from traditional bank financing, top bankers said at Mint’s BFSI Conclave.

- Shayan Ghosh

CEOs of Citi, IndusInd, and Bank of Baroda (left to right).

In a panel discussion at the event, they said the availability of alternative financing for companies, coupled with difficulty in getting bank deposits, has led to a structural change in the pace of credit growth.

“Indian banks’ credit-to-GDP (gross domestic product) is almost around 55%, and to be a developed country, I think we need to push it to something around 60-65%,” said Debadatta Chand, chief executive, Bank of Baroda.

Chand said that apart from agriculture and small businesses, significant economic development is linked to bank credit. He said that the Bank of Baroda witnessed muted corporate loan growth in the first six months of the financial year but expects a pickup in October-March.

According to Rajiv Anand, chief executive of IndusInd Bank, the composition or ability to garner cheaper deposits is expected to change going forward. Therefore, the days of just looking at credit growth as it is—at least in the medium term—are over, because now corporates have multiple ways to finance capital structure, including local equity, global equity, local bonds, global bonds, and bank loans.