Credit growth of 18% possible, says K V Kamath

Indian banks might meet the Reserve Bank of India’s projection of an 18 per cent growth in credit, K V Kamath, chairman of the country’s second largest lender ICICI Bank said in Mumbai today.

“It is a growing economy so 18 per cent credit growth should be possible. However, as long as output and investment do not suffer I will not worry even if we don’t meet the target,” the former CEO of ICICI Bank said on the sidelines of a seminar.

Banks have given out Rs 1,82,000 crore of loans in the financial year up to December 4—a 6.2 per cent growth over the figure at the end of 2008-09. They will have to lend an additional Rs 5,28,390 crore in the fourth months up to March 31, 2010 to meet RBI’s projection of a 18 per cent growth for 2009-10. The year-on-year rate of growth in credit as of December 4, 2009 was 10.5 per cent. According to Kamath, Indian companies were relying on internal accruals as well as the buoyant capital markets to fund new projects and using bank credit as a supplementary source of funds.

“This is particularly true in the manufacturing, cements and auto sectors. Only infrastructure companies are relying on banks to fund projects,” he added. Kamath also said the amount of liquidity in the system was not reflective of the current rate of growth.