Banks may have to dress up their loan book to just about meet the credit growth targets set out by RBI. While they have lent Rs 35,500 crore in the latest fortnight ended March 12, banks will have to find borrowers for close to Rs 95,000 crore by March 31 to clock in the 16% credit projection for FY10.
Loan disbursals of this scale are not unusual during the last fortnight of March. Banks usually inflate their books by parking large loans at low rates with blue chip companies that have active treasuries. Such loans are repaid a month later, and is reflected in subsequent credit numbers.
According to the latest RBI data, total loans extended by banks, including loans to businesses and individuals as well as food credit — rose Rs 35,527.38 crore in the latest fortnight ended March 12 to touch Rs 3,124,850.29 crore. Both food and non-food credit rose by Rs 1,510.7 crore and Rs 34,016.68 crore, respectively. The loan growth in the latest fortnight is almost the half the levels of the comparable fortnight in the previous year during which loans grew by around Rs 79,000 crore.
According to Deepak Mohanty, executive director of RBI, credit growth this year (up to January 2010) is much more broad based compared to last year. Though infrastructure has recorded the highest growth, loans to agriculture, small and medium enterprises and services has been higher than last year, he said.
At current levels, the annual year-on-year (YoY) growth works out to 18.1%, while loans have grown by around 12.6% since April. This means that banks have to lend about Rs 94,786 crore between March 13 and March 31 to meet the central bank’s revised growth projection of 16% for FY10.
According to D Sarkar, executive director of Allahabad Bank, “Corporates are demanding credit at very low interest rates which many banks are not very comfortable with. This results in slowdown in credit. In effect, banks do not want to compromise on risk and margin only to gain good volume of business.” A pointer to the risk averseness of banks is the high amounts parked by them in various mutual funds scheme. The latest data shows that they have parked over Rs 100,000 crore in essentially liquid funds that are perceived to be zero risk.
Bankers point out that though the industry may have to stretch itself to reach the target, most public sector banks are expected to reach the target with ease. Data until December suggests that public sector banks have been seeing a steady growth in loans, while private banks have witnessed a slowdown. Foreign banks, on the other hand, are seeing a contraction in their loan book. Recently, SBI chairman OP Bhatt had said his bank had not seen a significant pick-up in loans.
Total deposits mobilised by banks rose Rs 39,612.84 crore during the fortnight to touch Rs 4,402,943.09 crore as on March 12. While demand deposits dipped Rs 3,373.55 crore, term deposits rose Rs 42,986.39 crore, respectively.
Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/Banks-may-have-to-dress-up-books-to-meet-target/articleshow/5725352.cms
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