BANKS REFUSE TO TOE SBI LINE ON CREDIT GROWTH

State Bank of India, the country’s largest bank, may have pared its credit growth target to 16-19 per cent from 19-22 per cent earlier, but most other banks are still putting up a brave face for the time being.

This, despite the fact that since April, banks lent Rs 42,000 crore—only a third of their advances in the first three months of 2010-11. In April-June last year, banks had disbursed Rs 1.23 lakh crore.

Most lenders are refusing to cut their credit growth target for the current financial year in spite of slow demand for bank advances amid rising rates. Bankers prefer to wait till at least September-end before revising their loan growth targets. “We are sticking to our target of 20-22 per cent growth for now. We will review our growth targets only after September,” said M V Nair, chairman and managing director of Union Bank of India.

The demand for bank credit usually remains low in the first quarter of a financial year, but this year, the demand was further affected because of rising interest costs. Banks' lending rates have increased by up to 100 basis points since January.

Lending rates are expected to rise further in the coming months because the Reserve Bank of India (RBI) is likely to increase policy rates further to tame inflation. The central bank has raised key policy rates 10 times in the last 15 months.

A dip-stick survey of top public sector banks revealed most lenders are still confident of expanding their loan book in line with earlier projections. “We are confident of achieving 20-22 per cent credit growth target as we stated earlier,” said K R Kamath, chairman and managing director of Punjab National Bank (PNB).

PNB's smaller rival, Bank of India, has not revised its growth target either. “Our credit growth is expected to be in line with the industry, which is seen at 19 per cent,” said Alok Misra, chairman and managing director of Bank of India,.

Bank of Baroda Chairman M D Mallya said he would fix the bank credit growth at 23 per cent. However, some bankers said if loan growth continued to dwindle in the second half of the financial year, they may revise their forecasts.

“Our credit growth projection remains intact at 20 per cent. We expect credit growth to improve in the coming quarters. If the slowdown persists, we will revise our targets,” said M Narendra, chairman and managing director of Indian Overseas Bank.

The country’s largest private sector bank, ICICI Bank, has revised its loan growth target to 18-20 per cent, but that is only marginally lower than its earlier expectations.

SOURCE: http://www.business-standard.com/india/news/banks-refuse-to-toe-sbi-linecredit-growth/440146/