Govt likely to reject banks' plea for lower credit target

The finance ministry is likely to reject a plea by banks to tone down credit growth targets for this financial year as the Reserve Bank of India (RBI) mid-term review did not show signs of any major slowdown in lending.

"Since RBI has not revised downward the loan growth, we will also not scale down the target given by PSU banks in their Statements of Intent to the government," official sources said.

They said the government had to go with what was stated by RBI.

RBI's mid-year monetary review stated that total credit extended by scheduled commercial banks (SCBs) increased by Rs 3,81,333 crore (23.3 per cent) up to October 12, compared with an increase of Rs 3,66,463 crore (28.8 per cent) a year ago.

On an average, PSU banks have also intended to grow their credit by 24 per cent for this fiscal. However, high interest rates had hit the credit figures of banks, prompting leading PSU lenders to ask the government to lower the credit growth targets.

Major state-owned banks, including State Bank of India and Punjab National Bank, have already reported a slowdown in loans.

PNB has even asked the government to revise its business target downward by 7-9 per cent to 16-17 per cent in light of general slowdown in the credit offtake. The country's largest lender, SBI, has said the bank had fallen short of its loan disbursement target of 24-25 per cent in the first half.

"We are nowhere near expectations till September but we should be able to meet the target on the basis of the sanctions that we have made. Those loans would be disbursed in the coming months," SBI Chairman O P Bhatt said recently.