The risk of non-performing assets, challenges of the knowledge economy and need for scale in the banking sector are issues needing immediate attention as India moves to a higher growth trajectory, a top banker said Wednesday.

"With an average GDP of 7.5 per cent for the last five years, India is moving to a higher growth trajectory... The question nagging my mind is... is the growth sustainable?" State Bank of India [Get Quote] Chairman O P Bhatt said presenting the theme for FICCI Conference on 'Global Banking' in Mumbai.

"With credit growth galloping at 30 percent, the NPAs, both gross and net, are coming down, but are they coming down in absolute terms? Or are they at the same levels? Or in some banks and in some instances are they rising?" he asked.

Underscoring his observation in the light of the US sub-prime mortgage crisis, Bhatt observed if there was a slowdown in asset growth, as at present, and no treasury income to make up for it, the problem would get compounded.

"The best financial experts could not predict the impact of the US sup-prime crisis... how many sub-primes were dwelling in India? The proactive treatment of risk is supremely important," he said.

On sustainability of growth, Bhatt also listed absence of a roadmap for investments into India, the weak corporate debt market and the dilemma of the public sector banks to raise capital without the government owners losing control or direction.

He maintained that consolidation was necessary as without scale, transition to higher growth levels will be difficult.

Pointing out that the financial sector has not been able to do enough, Bhatt said the divide between haves and have nots in India has widened into a chasm with evidence of public unrest and violence.

"There are issues within issues... A lot more needs to be done quickly or else we would be trampled," he said.

On the challenges of the knowledge economy, Bhatt highlighted that the public sector banks do not have the knowledge to capitalise on intellectual property or new business models.

As a word of caution on corporate governance, he once again cited the US sub-prime mortgage crisis where the banks, instead of taking the risks on their books passed it on other institutions.

"The collective greed of banks break down the credit discipline," he said, adding that banks in India need to be vary of making a quick buck and overlooking corporate governance issues.

"While we are in a business economy and technology is here to stay...we have to add a third dimension of spirituality to it to convert the knowledge into wisdom... the challenge is how," he concluded.