Indian banking sector needs to invest in technology and data analytics to figure out the right model for corporate lending, says Chief Economic Advisor

On Sunday while delivering Bandhan Bank’s annual anniversary lecture, Krishnamurthy V Subramanian, Chief Economic Advisor said, “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.” 

Public sector banks controlling the one-third of the banking sector loans have turned risk-averse following spurge of large defaults by private sector promoters and entrepreneurs. While this has adversely affected investment and economic growth, technology has the potential to spur investment and help the economy grow into a $5 trillion one. 

Banks internationally now work as fintech companies and through data sciences and artificial intelligence make customer dealings. Subramanian said, “If Indian banks used data analytics in terms 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. 

Amidst the pandemic, due to a lull demand and supply cycle, the financial sector has been tremendously hit. The credit growth of the banking sector got weakened in the first half of FY2019-20 and further fell down to 5.9 per in March 2020. However, until early June, the credit growth remained muted due to Covid-related disruptions. 

The CEA also added that the country’s credit percentage as been low in ratio with GDP despite being the fifth largest economy in the world. He said that its high time that India needs to start evaluating itself in the context of a global perspective.