According to Ashwani Kumar Tiwari, managing director of State Bank of India, "the increase in risk weights on unsecured loans in November 2023 and the draft circular on project loans for lenders sends a clear signal - temper down growth." "The signal is that if these riskier segments are growing faster, then you actually have to temper it down," according to the draft project financing circular and the restrictions or risk rates placed on slightly faster growing and riskier segments, such as unsecured loans. That is the stronger signal, Tiwari stated on August 28 at the Global Fintech Festival in Mumbai. Shut Off/Play Full Screen Speaking about the Indian banking system's trailing deposit growth, Tiwari stated that this is anticipated to catch up by next year. SBI's Managing Director has articulated a firm stance on how the bank should handle riskier business segments, emphasizing a cautious and measured approach. In today's rapidly changing financial landscape, certain business segments may experience accelerated growth, driven by high demand or emerging opportunities. However, the MD cautions that such rapid expansion can bring significant risks, particularly if these segments lack the stability or maturity to sustain long-term growth. As a result, the MD advises that SBI should deliberately slow down the pace of expansion in these areas, ensuring that growth does not outstrip the bank's ability to manage potential risks. The rationale behind this advice is rooted in the principle of sustainable growth. Rapid expansion, while tempting, can lead to overexposure to volatile markets or unstable business practices. By slowing down, SBI can take the time to thoroughly assess the risks associated with these segments, implement robust risk management strategies, and ensure that any growth is backed by strong fundamentals. This approach helps the bank avoid the pitfalls of overextension, which can lead to significant financial losses or operational challenges if the market conditions change suddenly. Moreover, the MD's advice aligns with SBI's broader commitment to maintaining financial stability and resilience. As India's largest public sector bank, SBI has a responsibility to protect its assets, stakeholders, and customers from undue risk. By taking a more conservative approach to expansion in riskier segments, the bank can continue to support economic growth while safeguarding its financial health. This strategy also allows SBI to allocate resources more effectively, focusing on segments that offer stable and sustainable returns, rather than chasing rapid growth that could prove unsustainable. In summary, SBI's MD advocates for a cautious approach to managing growth in riskier business segments. By advising the bank to slow down when these segments expand too quickly, the MD underscores the importance of balancing growth with risk management. This strategy not only protects the bank's financial stability but also ensures that SBI can continue to serve its customers and stakeholders effectively, even in a rapidly evolving market environment.
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