State Bank of India (SBI), the country's largest lender, expects credit growth to accelerate in the year beginning in April to as much as 15 per cent, helped by firms seeking funds to bid for coal concessions and mobile airwaves.
Arundhati Bhattacharya, SBI chairman, told Reuters in an interview that the pick up in lending compares to a "very very low" loan growth of below 10 percent in the year just ending.
The bank, she said, had come through a period of consolidation and was comfortable with the current pace.
India's economic slowdown in the past two fiscal years resulted in banks' loan growth hitting multi-year lows, while bad debts surged.
Bhattacharya, who has led the bank since late 2013, said it could take another three quarters for a turnaround in bad loans although strains were lessening.
"Still there are many corporates that are on the precipice, and for them to recede from the precipice, we need economic activity to happen," she said.
"We want that economic activity to kick up into high gear."
Bhattacharya added SBI was prepared for a new rule requiring higher provisions for restructured loans after April 1, describing the extra burden as "tolerable".
Restructured and bad loans together account for more than a tenth of all Indian bank loans.
That portion was 8.6 percent for SBI as of December. Asked about criticism over most Indian banks' failure to pass on two cuts in the central bank's key policy rate in a year, Bhattacharya said a cut in India's cash reserve ratio, the share of deposits which lenders must hold with the central bank, would "definitely help" banks to cut lending rates.
SBI is in talks with its insurance joint venture partners over a potential stake sale, after India allowed foreigners to own up to 49 per cent in insurers.
It could also consider a listing of the life insurance unit, Bhattacharya said.
But she added that it may take more than a year for the unit, which is 26 percent owned by BNP Paribas Cardif, to be listed.
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