Viral Acharya, RBI deputy governor Viral on Wednesday stated, “Public sector banks should learn from FMCG players and “democratize credit“, a move that can help state-run banks solve the “biggest fiscal challenge” of recapitalisation,”. He spoke in a summit organized by ET-BFSI.
“Learning from the FMCG companies on how to democratise credit through a satchetization approach would actually solve one of the biggest fiscal challenges that the country faces right now, which is how to ensure that the bills the government has to keep paying for recapitalising public sector banks can be brought down,” he added.
Identified PSBs need to shift their business models to work like small finance banks (SFBs) or microfinance institutions (MFIs) delivering less risky small credit and can increase their valuations as well for an eventual re-privatisation at a decent price.
On the Reserve Bank of India (RBI) on the public credit registry (PCR), which will have all the financial transactions of an individual or entity regardless of size, Acharya said access to such data will also ensure the lenders can lend to every person need of credit.
The sachetization of credit will help lift people out of poverty and also increase the very low debt-to-GDP ratio of 55.7 per cent in the economy, Acharya observed.
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