Credit demand rises 16%, fails to excite bankers

While RBI data shows banks' loan portfolios swelling, bankers remain cautious and hope to improve loan recoveries

GN Bureau | August 22, 2013



Rising interest rates, declining loan recoveries and a sluggish economy have failed to affect the demand for loans as bank credit saw a 16.6-percent rise on a year-on-year basis, according to the Reserve Bank of India.

The outstanding loan portfolio of banks rose from Rs 47,001.09 billion in August 2012 to Rs 54,790.52 billion this year, as per data released by the apex bank on Wednesday. The growth in demand is being attributed to the fact that other forms of borrowings have become dearer.

This comes as a sigh of relief for banks, most of which have been posting negative growth owing to the ailing economy and the tightening of monetary policy by RBI.

“If one is to compare year-on-year demand, there is an increase. Credit demand from small sectors and individuals has been consistent and the demand coming from the priority sector is generally high during this season,” said Arun Tiwari, executive director of Allahabad Bank.

However, Tiwari pointed out, one needs to be prudent while analysing credit demand. “It is important to understand that as far as bank credit is concerned, one should make quarterly comparisons to get a realistic idea,” he said. “Loan portfolios of most banks have shrunk in the first quarter this year (compared to the last quarter of 2012). Credit demand from corporate houses has slowed and in many sectors it has just frozen.

“The situation will continue to remain grim till corporate projects don’t get clearances and the economy is not revived.”

In addition, the issue of non-performing loans needs to be addressed at the earliest, Deepak Narang, executive director of United Bank of India, said. “The finance ministry has taken up the issue of NPAs with utmost seriousness and banks have also undertaken a variety of measures to ensure better recovery of loans. Solving the NPA problem is our priority right now,” he said.

So is there a possibility of reduction in interest rates any time soon? “Looking at the present state of affairs, reducing the interest rates would hurt our financials further. It will only worsen our situation,” Narang said.

Comments

 

Other News

Lost in Transmission: Why calls ‘drop’, what can be done about it

Random call drops across cellular networks has been a major nuisance for consumers. Despite the advent of technologies like 4G, 5G and users upgrading their phones, they continue face the same old problem of call drops. Earlier, with 2G, calling was the primary service from the mobile telephony firms, howe

India’s Semiconductor Mission takes giant leap

The union cabinet on Thursday approved the establishment of three semiconductor units under ‘Development of Semiconductors and Display Manufacturing Ecosystems in India’. Involving a total investment of nearly Rs 1.26 lakh crore, the three units  -- two in Gujarat, one in Assam – wil

Mumbai Airport: Less congestion, fewer delays, says MoCA

Mumbai is one of busiest airports in India, handling a large volume of domestic and international flights including military, non-scheduled and general aviation flights. Mumbai`s Chhatrapati Shivaji Maharaj International Airport (CSMIA) has two intersecting runways which cannot be operated

“900 tenders worth Rs 150 crore?” For ward-level works: BMC

BrihanMumbai municipal corporation is floating nearly 900 tenders worth of Rs 150 crore in the next 10 days, but that is only for ward-level civic works, the BMC clarified on Monday, reacting to reports in a section of media.    “Since there are 25 wards in BMC, it involves m

Elections 2024: Banks, post offices to chip in for voter education

In a first-of-its-kind initiative, Election Commission of India (ECI) on Monday signed a memorandum of understanding (MoU) with two prominent organisations, the Indian Banks’ Association (IBA) and the Department of Posts (DoP), to amplify its voter outreach and awareness efforts ahead of the forthcom

Charming tales of the Snakeman’s early years

Snakes, Drugs and Rock ’N’ Roll: My Early Years By Romulus Whitaker with Janaki Lenin HarperCollins, 400 pages, Rs 699

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook Twitter Google Plus Linkedin Subscribe Newsletter

Twitter