Banks Ease Time For Loan Drawals

Banks are extending the drawdown period of working capital loans advanced to corporates in a bid to boost sluggish credit offtake, leading bankers said.

They said many projects would be hurt if these loans were withdrawn on account of time and cost overruns.

Usually, a loan has to be drawn within six months. However, some banks are selectively extending this period by several weeks after assessing the project's viability.

The extension is on assurance of drawdown by the corporate during this period, bankers said.

"Many of these projects are commercially viable. If we don't extend working capital to them, the projects could face liquidity crunch on account of non-availability of working capital," a top official with Bank of Baroda (BoB) said.

 

BoB was granting extensions after consulting other banks in the consortium.

The official said the bank was constantly monitoring the position of loans' drawndown after sanctioning at the branch level.

It was also aggressively following up sanctions where the drawdown period has expired to find out if the funds are still required by the client.

However, not all banks are automatically extending the drawdown period. Bank of India (BoI), for instance, is renewing applications after the expiry of the drawdown period.

The renewal is followed by a fresh credit assessment, an official said. The Reserve Bank of India (RBI) and the ministry of finance (MoF) have, on several occasions in the recent past, expressed concern over the fact that deposits growth have outpaced credit growth.

Last week, the central bank discussed this in a meeting with bank chiefs. Finance secretary Vijay Kelkar has also recently brought up the issue in a meeting with bankers.

The RBI's latest weekly statistical supplement showed bank credit at Rs 3,28,132 crore. Deposits were put at Rs 6,64,006 crore as on September 25. The credit-deposit ratio was 49.42 per cent.

A year ago, credit was Rs 2,78,345 crore. Dposits were at Rs 5,41,920 crore, and the credit deposit ratio was 51.36 per cent.