Bankers confident of clocking 20% credit growth

Bankers today informed the Reserve Bank (RBI) that they are confident of achieving 20 per cent credit growth this fiscal, on the back of a strong revival in credit demand due to the economic recovery.

"With all the available parameters there, it (credit growth) will be definitely better than last year," SBI chairman O P Bhatt told reporters here adding a 20 per cent growth looks attainable as of now.

The government has set a growth target of 20 per cent for the banks both in credit and deposit segments in the current fiscal. Last fiscal, banks had overshot the 16 per cent target set by RBI and had ended the year with 16.5 per cent growth.
    
Bhatt said credit growth has already started picking up and once the demand escalates further, there would be pressure on banks to garner more deposits by hiking deposit rates.
    
"Once credit demand escalates, there will be a pressure on deposit rates to go up," Bhatt said, adding SBI, however, would wait for policy cues from RBI on July 27 prior to effecting any changes on its interest rates.
     
Stating that the current liquidity crunch is likely to ease by the end of the month, Bhatt said, "liquidity is already improving. By the end of July and going forward to August, liquidity is expected to be comfortable."
     
Bhatt was talking to reporters after the bankers' customary meeting with the apex bank top brass prior to the monetary policy review scheduled later this month. The apex bank is widely expected to hike its overnight lending and borrowing rates, repo and reverse repo, by another 0.25 per cent to check double-digit inflation. It had surprised the markets by hiking the repo and reverse repo rates by 25 bps late last month.
   
Deputy governor Subir Gokarn met senior bankers, including Canara Bank chairman and managing director AC Mahajan, Axis Bank managing director and chief executive officer Shikha Sharma, Bank of Baroda chairman MD and managing director Mallya and Bank of India chairman and managing director Alok Misra, amongst others.
     
According to Bhatt, the Reserve Bank is likely to soon announce a sunset clause with a deadline of June 30, 2011, for all loans in the erstwhile benchmark prime lending rate (BPLR) system to migrate to the new base-rate model.
    
Banks had approached the Reserve Bank for such a clause for all BPLR-linked loans, which, otherwise, would force them to administer two types of benchmarks--base rate and BPLR-- for many years in case a borrower refuses to switch to the new benchmark rate.
    
"Yes, they are going to announce (the decision on sunset clause)...The RBI is currently examining the clause (with a deadline of) one year...That is by June 30 next," Bhatt said.