Banks will focus on cash flow-based lending in future: Ajay Vyas, UCO Bank

Moving on from ratings criteria to grant loans, banks are likely to focus on cash flow-based lending in times to come, a top executive of UCO Bank has said.

”Banks will focus on cash flow-based lending in times to come and this has already been started by SBI,” Ajay Vyas, Executive Director, UCO Bank said. He was speaking at a virtual panel discussion on Redefining Corporate Financing in New Normal organised by PHD Chamber on December 23.

Various SBI officials have advocated for cash flow-based lending models over the traditional asset-based or ratings-based ones. In cash flow lending, a financial institution grants a loan that is backed by the recipient’s past and future cash flows.

Taking his talk further, Vyas noted that the turnaround time (TAT) for grant of loans needs to come down and emphasised that it was important to move on from ratings criteria to granting of loans. According to the Executive Director, UCO Bank, artificial Intelligence, algorithms, prediction analysis are the future of lending norms for banks to follow.

Later, speaking on banks’ exposure to the realty sector through Non-Banking Financial Companies (NBFCs), the DMD, Commercial Credit Group-II (North& South), State Bank of IndiaThekepat Keshav Kumar said, ”it is wrong to say that banks were lending to NBFCs and indirectly to the real estate companies as very less NBFCs have stakes in the real estate sector”.