Mumbai, Oct. 8 -- Days after the Reserve Bank's decision to allow banks to allow acquisition financing, SBI chairman C S Setty on Wednesday said entities like the country's largest lender are "well versed" to handle the upcoming line of business.
He said the shift to an expected credit loss (ECL) based system of asset provisioning will not impact the balance sheets of banks, given the extended transition period given by the central bank.
"We have been doing outbound merger and acquisition financing for Indian corporates acquiring overseas entities. I think banks like SBI are well versed in acquisition financing," Setty told reporters on the sidelines of the annual Global Fintech Fest (GFF) here.
It is worth noting that the Reserve Bank had announced a decision to allow banks to engage in acquisition financing, following a public request made by Setty itself a few weeks ago.
On the ECL, where the central bank announced the final guidelines on Tuesday, the SBI chairman said the country's largest lender is technologically ready in terms of models, but some adjustments may still be required.
"The long transition time that is given, we believe that there will be limited impact on the balance sheet of banks," Setty said. The shift to ECL from the current post-loss provisioning will commence in FY27, and banks have been given a five-year period for a complete transition.
Meanwhile, speaking at the fest, Setty said there is a need for banks to improve the collection capabilities for credit disbursed through the Unified Payments Interface (UPI).
Published by HT Digital Content Services with permission from Millennium Post.