Bankers See Lower Credit Growth This Year

Indian banks are making all efforts to boost credit offtake but are unsure whether they can better last year's performance. Bankers said yesterday they expected a lower or unchanged year-on-year growth in advances.

They said the core sector's growth was critical for economic revival and credit pick-up, but public expenditure was yet to give it the required big push.

They were also worried over poor first-quarter results of corporate India. A Business Standard study of 406 corporates showed a rise in net profits of only 8 per cent for the first quarter of this year over the same period last year.

 

In the first quarter of 1998-99, the banking sector's credit growth dipped by 1.58 per cent, compared to a dip of 0.6 per cent for the same period last year.

The year-on-year growth, although higher at 15.5 per cent against 10.6 per cent last year, did not enthuse bankers because last year's comparison was with a much better year.

Of the leading players, Bank of India said it expected credit growth at 18-20 per cent by the end of the year against 20 per cent in the previous year. Dena Bank and Bank of Baroda said they hoped to match their previous year's performance, but added that the outcome was difficult to predict at this stage.

First-quarter figures tell the story. State Bank of India's advances dipped by Rs 3,662 crore from March-end 1998. Bank of India's domestic advances declined by 0.75 per cent to Rs 16,891 crore in the same period, while Bank of Baroda's dropped nearly Rs 500 crore.

Besides, tardy corporate receipts and slackening offtake doubled the credit turnover cycle to six months from three months a few years ago, hitting returns from lending, bankers said.

Banks, however, continued to count on the core sector despite the widening gap between sanctions and disbursals.

"If the core sector picks up _ which depends on government spending _ a chunk of credit will go to this sector," a Bank of India official said.

Dena Bank said it would seek out power and railway projects. "We are trying to intensify our marketing efforts and are looking for potentially sound industries to lend to," an official said.

Bank of Baroda is also sharpening its marketing skills to woo clients of foreign banks. "We believe the worst is over. The larger corporates have done well which will have a positive fallout," an official said. Bank of Baroda was also trying to popularise retail loans to increase its disbursals, he said.