India’s global links to help banks grow: Kochhar
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Dismissing concerns of high corporate debt exposures posing possible default risks to banks in India, ICICI Bank MD and CEO Chanda Kochhar said loans have been given mostly for projects in investment phase and leveraging won't appear high once companies start generating cash flows.
Kochhar also said the country's financial services sector, including banking, has got tremendous growth potential.
Besides, she added, there will be great opportunities in the economy and its global linkages through Indian companies' overseas expansion activities.
"While there has been concern over high leverage in some segments of the corporate sector, the debt levels have to be seen in the context of the fact that many corporates are in an investment phase," Kochhar said in an interview at the the annual meeting of the World Economic Forum.
She said the companies' debt leverage would appear high only until the investments are completed and start generating cash-flows. "As the cash flows from the projects start, the debt levels will be sustainable and should moderate over time. What is important currently is to ensure that the projects under implementation get the necessary last mile clearances and linkages to ensure that the assets become productive on schedule."
Asked about her outlook for the Indian banking and financial sector, Kochhar said: "First of all, I would say that the Indian financial sector has tremendous growth opportunities over the next few years. The banking sector should grow at least 2.5 to 3 times of the GDP growth rate, and the improvement in the GDP growth rate will drive growth in the banking sector."
"Secondly, India's growing global linkages, whether in terms of international companies investing in India or Indian companies going overseas, will provide a growth opportunity for Indian banks," she said, adding that "The penetration of financial services in India is low and we can achieve significant growth by increasing the level of penetration."