India’s ambitious goal to become a $5-trillion economy could be fulfilled with additional $1 trillion debt, to match developed market trends, SBI Chairman Dinesh Kumar Khara said.

India’s ambitious goal to become a $5-trillion economy could be fulfilled with additional $1 trillion debt, to match developed market trends, SBI Chairman Dinesh Kumar Khara said on Thursday. “Considering the fact that we have an ambition to grow to a $5 trillion economy, in my mind, the debt and GDP ratio needs to improve. If we look at developed markets, that (debt to GDP ratio) is around 200%… So I think there is a huge scope for banks to contribute to the country’s journey to be a $5 trillion economy,” Dinesh Kumar Khara, Chairman, State Bank of India, said in an interview to ET Now.

The Indian economy is currently sized at $3 trillion, in which the loan book size from the banking system stands at $1.6 trillion, Khara said, adding that he expects the loan book size to go up to $2.6 trillion for a $5 trillion economy.

The bank credit to gross domestic product (GDP) ratio is around 56% currently, while the corporate debt to GDP ratio stands at 90%. In developed countries, the private debt to GDP ratio stands at over 200%, Khara said, pointing to the scope of improvement. He added that the banking sector needs capital to support the ambition of economic growth.

In the interview, the chairman of the country’s largest lender also touched upon his outlook for the economy as well as for his company, mentioning that he expects 2022 to be a year of growth. Talking about the outlook for the SBI for 2022, Khara said he hopes to achieve an ROA of 1% and ROE of 15% + in the medium term.

https://www.financialexpress.com/industry/banking-finance/india-needs-1-trillion-more-in-loans-to-become-5-trillion-economy-says-sbi-chairman-khara/2388158/