CRGB Officers' Organisation

One for All and All for One


Credit growth tentative

Posted by drgorg on January 10, 2010 at 10:56 AM

Credit growth 16 per cent

“Credit growth is still tentative in the banking system. It is yet to gain momentum. Currently, it is 16 per cent. It may reach the RBI'sprojection of 18 per cent by the year-end.  As far as SBI is concerned, we will cross the 16 per cent estimate we have made for credit growthas of now" said the State Bank of India Chairman, Mr O. P. Bhatt,  "If credit growth picks up a little more, we can cross 18 percent also,” he said at a curtain raiser to announce Indian Banks' Associations' two-day Bankers' Conference (Bancon), which begins onJanuary 11.

When asked about the risk of retail loans going bad, the SBI chief underscored the fact that retail lending comprised only 10 per cent of SBI's total credit portfolio.

The average size of home loans, which comprise a major chunk of theretail portfolio, was around Rs 15 lakh. “We are catering to the retail demand mostly from the salaried and the self-employed. There is no extra risk of higher level of non-performing assets due to focus on retail loans,'' he said.

The SBI chief observed that even the RBI were to raise the Cash Reserve Ratio by 25-50 basis points, banks would still have enough liquidity. SBI has been trying to depress deposit accretion. This year, despite retiring bulk deposits aggregating over Rs 60,000 crore, the bank was still faced with liquidity overhang as every month savings bank deposits of Rs 5,000 crore were coming in.

According to Mr M. D. Mallya, Chairman and Managing Director, Bank of Baroda, the bank had substantially cut down dependence on bulk deposit as one of the sources of funds. BoB has retired over Rs 20,000-crore worth of bulk deposits in the last one year.

“We have seen 20 per cent year-on-year credit growth in the December quarter. The growth in April to December period is around 12 per cent.For the full year credit growth will be 20-21 per cent. There have been new loan sanctions aggregating to Rs 27,000 crore between April and November. Disbursals are taking place now,” said Mr Mallya.

For the banking system credit growth as of now is actually only 10-11 per cent. On the one hand credit growth has slowed down and on the other NPA growth has accelerated, said Mr Bhatt and added that there will be a lag effect. NPA formation will continue at a faster pace for one or two quarters more.

Friends, these are the statements from two of the biggest Banks in India, who have a huge capital base and can afford ro write off a huge portion of their NPAs, think about the effect on our economy and what about the smaller Banks and RRBs, will they be able to absorb the shock of increasing NPA and low credit growth.?

Your views are invited,

Have a nice time

Until next time..



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