SBI turns bullish on credit growth for FY17

Monsoon to fuel rural lending, industrial borrowing may get a leg-up

State Bank of India (SBI) will raise its credit growth estimate for 2016-17. "We are growing at very close to 12 per cent. This is the slow quarter. We may revise credit growth projections in the middle of the year," SBI Chairperson Arundhati Bhattacharya said.

The review would depend on demand for high-value project loans, Bhattacharya said, adding unlike in the previous economic upturn when the bank piled up non-performing assets, SBI would be more circumspect, while participating in project finance. SBI executives said the last time such upward revision through mid-term review happened 10 years ago in 2006. It had substantially raised the target for home loan growth, as part of the plan to scale up retail lending.

Bhattacharya said the country's largest bank expected faster growth in credit to rural areas. The ensuing upturn could fuel industrial credit, she added.

SBI's advances rose 11.41 per cent to Rs 14,63,690 crore in first quarter (Q1) of the current financial year from Rs 13,13,735 crore in Q1FY16. The bank had set a loan growth target of 12 per cent for 2016-17, based mainly on retail loans that had jumped 23 per cent.

Other public sector lenders do not share Bhattacharya's optimism, though. "We believe this year our credit growth will be 9-10 per cent. But we are growing well in segments and this has provided us opportunities to cross-sell," said Arun Tiwari, chairman and managing director, Union Bank.

An IDBI Bank executive said the monsoon would push up farm credit but his bank's base was industrial credit and it was early to say if corporate lending would revive adequately.

"SBI has a large base of retail clients so it has the wherewithal to expand its book at a higher pace," he said.

Bank credit has grown 9-10 per cent in the past year, and public sector banks have found themselves struggling.

A report by the Boston Consulting Group and Ficci said private banks expanded their loan book by 20 per cent in 2015-16 and the state-owned ones by four per cent as their bad loans climbed. Deposits with public sector banks grew five per cent, against 18 per cent with private banks in 2015-16.

Indian banks collectively closed 2015-16 with credit growth of around nine per cent, a six-decade low, as cash-strapped and over-leveraged companies moved away from bank funds to the money market even for working capital loans.

DRIVERS FOR UPWARD REVISION IN LOAN GROWTH

• Good monsoon to spur rural demand
   
• Upturn in economy to nudge industrial credit up
   
• Seventh Pay Commission award will aid retail demand
   
• Further softening of lending rate to attract more demand
   
• Cleaning up of books giving strength for credit decisions