Stable government will lead to accelerated lending: former SBI CFO

Private sector lenders have seen a strong rally, but state-run banks continue to be weighed down by asset quality issues. A sharp slowdown in domestic as well as global economy has led to rising non-performing assets (NPAs) in the banking sector.

Rising stressed loans (bad or restructured) in India is particularly acute for state-run banks, which have bad loan ratio of about 4.5 per cent. Still, markets seem to be ignoring continued rise in NPAs amid expectation of a stable government led by BJP at the centre.

Diwakar Gupta, former managing director and chief financial officer at SBI told NDTV that it's difficult to say if the worst of the asset quality pain is over for India's banking sector. It will take a minimum of six months for the situation to turn around if a stable government comes to power, he added.

"But definitely if a stable government comes to power then it will help in creating demand and the credit off take will go up and this will help the sector to revive... As and when the economy will revive banks will be able to recover most of its bad assets which is currently to the tune of 2 lakh crore," said Mr. Gupta.

He also highlighted that a stable government will lead to accelerated lending by the banks specifically to the beleaguered infrastructure sector, which are project depended rather than on management profile.

So, if a stable government will come to power then it will be able to push through reforms, which the sector needs urgently.

The Bank Nifty is up about 15 per cent so far this month, outperforming the nearly 5 per cent gain in the NSE. Sharp gains in banking stocks propelled the BSE Sensex and Nifty to a record high on Monday.