The State Bank of India sees opportunities to gain back market share of loans lost to shadow banks over the last decade, as government interventions seek to rein in their loans.

State Bank of India (SBI), which is still emerging from a period of massive provisioning on loans to large corporates, spots opportunities in taking business away from the shadow banks without sacrificing asset quality. 

«We are not shying away from any business but that does not in any manner mean that we are going to dilute our underwriting standards. I believe there is sufficient business that meets our underwriting standards,» said SBI's chairman Rajnish Kumar, who was quoted in «Bloomberg» (behind paywall). 

India's Shadow Banks Under Pressure

A series of defaults by Infrastructure Leasing & Financial Services has forced the government to act, putting India’s shadow lenders under pressure since last year. As a result, non-banking financial companies were forced to sell assets and rein in new loans, giving state-owned lenders an opportunity to regain market share they have lost over the last decade. 

Data from Reserve Bank of India compiled by HDFC Securities showed that state banks' share of total lending has dropped from 60 percent in 2018 to 47 percent in 2018.

Growth Target

Kumar believes that SBI’s strong capital gives it the room to seek more mortgages and small business loans, which had been a focus for the non-banking financial companies (NBFCs) before the crisis erupted. That should help the bank attain its target of 11 percent loan growth for the year to March 2020, Kumar said, versus 12 percent growth of the previous fiscal year. 

Home loans and other consumer lending accounted for 6.48 trillion rupees ($93 billion), or 32.5 percent, of SBI’s total domestic lending as of March 31. Advances to companies in India accounted for another 43% of the book, while SME lending was 14.5 percent. SBI had outstanding loans to NBFCs of 1.87 trillion rupees at the end of March, the majority of which were backed or owned by the central and state governments or by large private sector institutions.