Between the last week of March and that of July, the net decline in the non-food credit offtake in SBI is a whopping Rs 2,600 crore. In absolute term, its domestic advance portfolio came down from Rs 55,600 crore to Rs 53,000 crore. In contrast, the domestic deposits during this period grew by Rs 1,800 crore. A clear case of liquidity overhang. Compare this with the 1995-96 scenario.
During the year, SBI's deposit liability grew by Rs 11,900 crore and the advances by Rs 11,400 crore! At one point of time the credit-deposit ratio at SBI shot up to 119 per cent and the bank had to impose a 15 per cent cut in the quarterly operating limits of the corporates in the first quarter of 1996-97. Last year, the SBI advance rate was pegged at 15.5 per cent between the last week of April and the first week of November and it was raised by 100 basis points at one stroke when the demand for credit reached its peak. The liquidity crunch continued till the end of first quarter of this fiscal when SBI lifted the cut in QOL and cut the PLR by 50 basis points to 16 per cent.
With the PLR now being fixed at 15.5 per cent, the difference between the SBI advance rate and that of the majority of PSU banks has been widened to 100 basis points. Last time in July when SBI cut its PLR, only a handful of PSU banks followed suit. This time, the scene will be no different as being the largest commercial bank in the country, SBI suffers the most from the corporate apathy to bank credit. While the net decline in the entire banking industry's credit portfolio is about Rs 1,800 crore in the first four months of the year, the fall in credit offtake in SBI is aroundRs 2600 crore.
In other words, there are banks which have registered growth in advances, however marginal it may be and hence they do not need to cut their lending rates. The weaker banks in any case need not follow the SBI example as they have capped their credit portfolios. To strengthen their bottomlines, these banks are focussing on recovery of bad debts already provided for, and not on advances.