Credit disbursement: Banks face pressure to avoid large-scale slippages

Pressure is building on bankers to extend loans and follow up on overdue instalments to avoid large-scale slippages by the end of the June quarter.
 

Public sector bank executives point out that banks understand the need to provide critical support to borrowers hit by the lockdown, imposed to contain the spread of Covid-19.
 

They are giving priority to extending credit for meeting borrowers regular expenses. While extending credit, banks want to ensure that borrowers follow norms. For loan disbursement, it is tough to assess end usage during lockdown without inspection.

Banks are supposed to provide loan disbursal figures to the finance ministry at frequent intervals. This has created pressure at the senior level, said a senior executive with a south-based public sector bank. While thrust is building for garnering more business, many odds have come together this time. There is demand destruction where activity has almost come to halt.
 

Venkatachalam C H, general secretary, All India Banking Employees Association (AIBEA), said the government is interested in boosting credit. Also, there is pressure from corporates to open up. But it is not easy in India. Credit has not picked up but only deposits have gone up. If bank credit does not grow, then economic growth may not pick up.

The risk of credit growth going into minus is real. The Reserve Bank is pushing more liquidity into the system, but there is no one to take that money, Venkatachalam said. The incremental growth in bank deposit for the first 10 days in the new fiscal year was 1.1 per cent against incremental bank credit de-growth of 0.3 per cent, said CARE.

Bankers sought to know as to what they would do with the money. Industry is asking for money to start production, but this is not easy, they said, adding moratorium is only a breather and that is not going to change payment to clients.

According to CARE, the banking system continues to remain in liquidity surplus of over Rs 4.75 trillion during the week ended April 24.