Credit growth for PSBs, excluding SBI, falls to 1.4% in Jan-March quarter; deposit growth at 3.1%

PSBs (excluding SBI and its associates) have also been struggling with deposit accumulation in the same period

Public sector banks (PSBs) with rising bad loans on their book recorded dismal credit and deposit growth in the January-March quarter. According to Reserve Bank of India data, during this period the bank credit of PSBs — excluding State Bank of India and its associates — grew by a mere 1.4 per cent compared with 7.8 per cent in the corresponding period in FY15.

Though overall bank credit in the system has been growing at a slow pace, it was still at 9.3 per cent in the quarter ended March. This was because private lenders, foreign banks and SBI managed to record double-digit credit growth. PSBs (excluding SBI and associates) have also been struggling with deposit accumulation in the same period. During the January-March quarter, deposit growth was only 3.1 per cent, compared with system growth of 8.6 per cent. These PSBs have been struggling with an increasing proportion of bad loans on their books. In fact, at the end of March 2016, the tally of bad loans for the listed PSBs (including SBI & associates) stood at Rs 5.81 lakh crore, compared with about Rs 3 lakh crore at the end of March 2015.

In fact, several of these PSBs have recorded losses and in the last two quarters had been focusing on cleaning up their balance sheet as a result of which both the credit and deposit growth had taken a hit.

Bankers and analysts don’t expect a significant pick-up in credit growth for the entire system any time soon. “Given that demand is still a laggard we are sceptical of credit growth picking up even as the banks are in the midst of balance-sheet cleaning,” said SBI in a research report. Continued economic slowdown and no real strong signs of recovery in the corporate sector are adding to the woes, agree bankers.

“Even though we have seen credit offtake in the retail sector, it is the absence of a real recovery in the corporate sector that is adding to the pain. On the deposit side, we have seen the deposit rates fall down as compared to last year.  Some data also show that the money in circulation has increased which shows that people are probably holding on to cash and all this has pushed deposit growth down,” said a public sector banker.