Non-performing asset levels in the Indian banking industry could likely increase, a top banking industry official said.
An increased level of 'stressed assets' in the banking system could push up the NPA levels of banks, State Bank of India's chairman O P Bhatt, told reporters on the sidelines of a Ficci-IBA organised banking seminar on Thursday.
Banks must prepare themselves with better risk-management systems, Bhatt said.
Pegging credit growth in the industry at around 29 per cent this fiscal, Bhatt said that the overall asset growth in FY09 'remains bullish' because of a high demand.
He, however, said that some segments such as auto and commercial vehicles have witnessed a slowdown in recent times.
The infrastructure and agri-sectors needed more funds, he said, adding there was a huge demand for credit from the corporate sector.
"There is a huge demand for credit from the corporate sector as global funding sources have almost dried up. Most corporates have turned to banks for adequate credit," he said.
On liquidity, Bhatt said that 'it continues to be a big issue' though for the present, there is ample liquidity in the system.
"There is a need for structural liquidity in the system which is sustainable in the long-term," he said, adding that the regulator was aware of the prevailing liquidity situation in the system and was ready to act according to the requirements of the situation.
"We need liquidity not only in the short-term but in the long-term as well," Bhatt said.
On economic growth, the SBI chairman said that it continued to be in the range of 7.5-7.9 per cent.
"Growth continues to be in the range of 7.5-7.9 per cent," he said, adding that the drivers of this growth include the financial sector, middle-class income and the rapidly-growing private sector.
Even the most pessimistic of growth projections put it at between 7.5-7.9 per cent, he said.
The Indian economy has the advantage of demographic benefits, he said, as the number of working population was quite high.
In the next 20 years, India would have around 68 per cent working population, he added.
Asked about the health of the Indian banking system, Bhatt said that it was in good shape because of strong prudence and the existence of a well-regulated regime.
