Eye on retail, SME credit as public sector banks prepare for festivals

Banks to ramp up efforts during outreach programme

Public sector banks (PSBs) are fine-tuning plans for the upcoming festive season instead of waiting for an outreach programme to scale up credit off-take across the country. Besides retail and farm sectors, thrust will also be on export credit, in tune with global recovery, bankers said.

Saloni Narayan, deputy managing director (retail business) State Bank of India (SBI), said the festive season has started in the south with Onam and Ganesh Chaturthi set to be celebrated in the west next month.

Banks are in better shape with comfortable capital adequacy, provisions cover for bad loans and enhanced credit filters, as compared to two years ago.

A S Rajeev, managing director and chief executive, Bank of Maharashtra, said banks have already been working, keeping the festive season in mind. The work will be stepped up during the outreach programme from the third quarter, especially in the east and the northeast.

According to the Reserve Bank of India (RBI) data, retail loans registered an accelerated growth of 11.9 per cent in June 2021, as compared to 10.4 per cent a year ago. The increase was primarily due to accelerated growth in ‘loans against gold jewellery’ and ‘vehicle loans’.

Large PSBs, which were historically wholesale lenders, have shifted focus to retail and have seen continued growth in segments such as unsecured loans that were largely a domain of private sector banks. Retail segment is expected to continue to drive aggregate credit growth in FY22, according to a CARE Ratings review.

The idea behind the outreach plan is to advance credit ahead of the festive season, when demand is anticipated to pick up. The focus is also on giving a push to credit guarantee schemes announced by the government after the second wave, government officials said.

The government will consult stakeholders like trade bodies and Indian Medical Association, and banks will be requested to push credit to these sectors. Banks have also been asked to give a special emphasis to credit requirements of exporters. They have also been directed to follow a uniform approach to advance credit to exporters.

In a similar outreach exercise in 2019-20, about Rs 4.9 trillion loans were advanced to retail, agriculture and MSMEs between October 2019 and March 2021. The exercise would be continued this year to help small businesses hit by the pandemic. Banks will do co-lending through non-banking finance companies and micro-finance institutions for ensuring last-mile reach.