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Wednesday, Sep 02, 2009
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Business Daily from THE HINDU group of publications Wednesday, Sep 02, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Economy Money & Banking - Credit Market Web Extras - Corporate Credit offtake set to rise 
On a positive note: (From left) Mr H. Khorakiwala, President, FICCI; Mr M.V. Nair, Chairman, IBA and CMD, Union Bank of India; and Dr K. Ramakrishnan, Chief Executive, IBA, at a press conference in Mumbai on Tuesday. Our Bureau Mumbai, Sept. 1 Banks can achieve the 20 per cent credit growth projected by the Reserve Bank of India in its Annual Policy, as corporate demand is expected to gather steam in the second half of the financial year, according to Mr M.V. Nair, Chairman, Indian Banks’ Association. The expectation of credit pick up stems from encouraging GDP and IIP numbers, which in turn could boost further investment by corporates, said Mr Nair, who is also the Chairman and Managing Director of Union Bank of India. As the economy revives, the requirement for working capital and term loans by corporates could go up, thereby reviving demand for credit. As corporates start availing loans, the gap between sanctions and disbursements will come down, the IBA chief said at a press conference to organised to announce the details of the forthcoming FICCI-IBA banking seminar “Credit growth could improve from the current 15 per cent and reach RBI’s projection of 20 per cent,” Mr Nair said. Last year, the banking system reported a credit growth of 26 per cent. Indian economy grew by 6.1 per cent during the first quarter of the current fiscal, higher than the 5.8 per cent growth in the previous two quarters. The June IIP numbers were also encouraging at 7.8 per cent.
The loan sanctions by public sector banks have risen by 50 per cent in the October to May period. In the October 2008-May 2009 period, public sector banks sanctioned loans worth Rs 7,67,026 crore, as against Rs 5,40,079 crore in the corresponding period last year. For corporates, the cost of borrowing to gross profits has come down from 35 per cent in the third quarter of last fiscal to 23 per cent in the fourth quarter and even lower in the first quarter of this fiscal. Most of the public sector banks cut lending rates even before bringing down deposit rates and this was putting pressure on their Net Interest Margins. The BPLR of banks are at different levels and there is scope for some banks to reduce rates further, Mr Nair said. However, he said that Union Bank may not reduce lending rates further. The bank is expecting a 5 per cent month-on- month credit growth in the festival season. Sluggish growth in credit More Stories on : Economy | Credit Market | Corporate
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