The country's largest bank, State Bank of India (SBI) may raise its credit growth target for 2006-07 amid pressure on margins owing to dependence on high-cost bulk deposits. | |
| The credit is growing at 35 per cent and with onset of the busy season, there are signs of further increase in the growth in advances, Yogesh Agarwal, managing director (national banking group), said after announcing a tie-up with Motilal Oswal Securities for providing online trading facility to its customers. |
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| "The bank may revise the target (for credit growth) and there is a possibility that the bank's performance may be higher than the target set for 2006-07," Agarwal said. |
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| This is in contrast to what SBI chairman, O P Bhatt, had said in October. Bhatt had said, "Dome more moderation in credit offtake is in the offing. For the banking industry, credit growth has moved from 33 per cent last year to 29 per cent. For SBI, the credit growth is likely to be around 25 per cent in 2006-07." SBI's gross advances grew by 21.18 per cent to Rs 2,88,840 crore at the end of September 2006 from Rs 2,38,351 crore a year ago. |
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| On home loan growth, Agarwal said, "The extent of growth in home loan advances has been the same as last year. The growth has plateaued in a way." |
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| SBI's housing loans grew by Rs 6,230 crore to Rs 34,571 crore at the end of September 2006 from a year earlier. SBI disbursed housing loans of around Rs 4,800 crore during April-September 2006. |
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| Dwelling on resources raising to fund credit expansion, he said the current pace of deposit growth would provide adequate resources. But banks, including SBI, will want a level playing field for motivating people to channelise bigger amount of savings in deposits. |
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| With liberal tax benefits the mutual funds are mopping up investor funds. Bank deposits upto Rs 1,00,000 with maturity of five years and above are entitled for tax exemption. |
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| Many mutual funds are garnering funds, which are in turn parked with banks (as bulk deposits) for higher interest rate. This has put pressure on margins, Agarwal said. The net interest margin (NIM) of the SBI at the end of September 2006 was at 3.32 per cent compared to 3.13 per cent a year ago. |
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| Through the tie-up with Motilal Oswal, SBI plans to initially offer on-line trading facility through 10 branches in Mumbai. The facility will be provided through 350 more by March 2007. |
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