'Banks will meet 19% credit growth target for FY12'

Despite concerns about a slowdown in demand for credit in a high interest rate scenario, the chairman of the Indian Banks Association, M D Mallya, has said the industry will meet the target of a 19% jump in advances this fiscal.

"The overall banking system will achieve 19% credit growth, the demand has not been affected as it is made out to be," Mallya, who is also the Chairman and Managing Director of Bank of Baroda, told reporters on the sidelines of a book release here late last evening.

When asked about sectors showing some stress presently, he said, "There is a bit of a slowdown as far as new projects are concerned."

 

Concerns have been raised in the past few days that the present high rate scenario can affect credit offtake in the system as projects get deferred or scrapped due to dearer credit.

The Reserve Bank has hiked key borrowing and lending rates 10 times since March, 2010, to tame inflation, which stood at 9.06% in May, 2011. The RBI has also said it is ready to sacrifice growth in the short-term in pursuit of its objective to rein in inflation through rate hikes.

Advances by Indian banks grew by 21.5% in 2010-11 and in its annual monetary policy announcement, the RBI had projected a credit growth of 19% in 2011-12.

Bank of Baroda will achieve its targeted advance growth of 23-24% this fiscal as well, Mallya said.

"Last few years, we have been achieving the number and this year as well, we will grow in that range," he said.

Answering a specific query on home loans, he said demand remains "steady" and BoB's home loan book has grown at a "consistent" 22%.

When asked about vehicle loans, he said it is too early to say there is a slowdown and we would have to wait for the numbers to come in.

Experts had earlier opined that retail credit demand will be affected as rates get hiked due to the direct impact it has on family budgets. In the case of vehicle loans, there is the additional worry of rising fuel prices, which can lead to purchase decisions being put off.