Banking system is in a Catch-22 situation: Indian Bank's Padmaja Chunduru

Topics Indian Bank | MSME credit | Lockdown

Bank’s MD & CEO Padmaja Chunduru says there is a need to look at ways to assess risk in an uncertain environment
The Indian banking system is in a Catch-22 situation — balancing between credit growth and bad loans, said Padmaja Chunduru, managing director (MD) and chief executive officer (CEO) of Indian Bank.

Chunduru was speaking at a webinar organised by the Indian Chamber of Commerce (ICC) on quantitative easing and credit risk. “Banks are in a Catch-22 situation. If banks don’t give credit, there is a risk of failure of organisations. If banks lend too much, lending might take a hit on the balance sheet. Credit quality is a constraint, and we have to look at ways to assess risks in an uncertain environment,” she said.

However, the immediate concern for bankers was to manage the present situation, she added. Indian Bank has 450,000 MSME customers who are eligible for loans guaranteed by the government. 

Chunduru’s views were echoed by Chandra Shekhar Ghosh, MD and CEO of Bandhan Bank. Banks are in a challenging spot as they need to balance credit growth with non-performing assets, he said. “Banks are in a very critical situation as on one hand they are required to assess the credit worthiness of customers, while on the other hand they have to balance it with credit growth.”

Credit growth should start picking up in the second quarter, said Ghosh. But, the biggest challenge would be to give credit to small enterprises which do not have any credit ratings.

While the schemes announced by the government to help the MSME sector are good in intent, the key lies in administering the same, said Rajesh Kumar, MD and CEO, TransUnion Cibil.

“There needs to be a tight monitoring mechanism for assessing MSME's cash flows and production cycles. We have created a Cibil MSME rank to provide risk differentiation," he said.



Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel