Want 3G loans to be treated as secured assets; liquidity seen back by month-end.
Bankers have told the Reserve Bank of India (RBI) that real credit offtake is yet to take place, though credit growth for the first quarter has been 20 per cent.
“The credit growth figure we are seeing is due to the base effect. Except for power and steel sectors, most banks have not seen substantial demand from any other sector,” said a banker who was present at the pre-policy meeting with the central bank on Monday.
As on June 18, bank credit grew 19.6 per cent year-on-year. Over April, banks disbursed Rs 70,000 fresh loans, most of which were to telecom companies for paying for 3G and broadband licences — a one-time affair. Loan growth was almost flat in the comparable period last year.
Some bankers, however, are optimistic that RBI’s projected loan growth, which is 20 per cent for 2010-11, will be achieved. SBI Chairman O P Bhatt said after coming out of the meeting that 20 per cent credit growth was achievable in the current financial year.
Bankers told RBI that deposit accretion had been lower than the previous year but they saw no case for raising deposit rates due to lack of real demand for loans.
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“RBI is of the view that liquidity will come back by the end of the month. Even if liquidity comes back, it will not be surplus, but adequate. Banks are of the view that a hike in the cash reserve ratio is not required even if liquidity comes back,” said a bank chief who attended the meeting. He added if RBI hiked policy rates on July 27 — when first-quarter review of the monetary policy will be announced — banks might have to increase lending rates.
All four deputy governors of RBI met the country’s top bankers at the meeting. Apart from Bhatt, Canara Bank Chairman A C Mahajan, Bank of India Chairman Alok Mishra and Managing Director and Chief Executive Officer of Axis Bank Shikha Sharma were present.
The bankers also requested the central bank to allow them to treat loans to telecom companies for paying for 3G and broadband licences as secured assets as most banks were on the verge of breaching the internal cap on unsecured advances.
“RBI officials have taken note of the request. We expect a positive outcome as the central bank has not ruled out the possibility,” said a banker.
...want BPLR sunset by June ‘11
The country’s bankers have urged the Reserve Bank of India (RBI) to invoke a sunset clause for loans linked to the benchmark prime lending rate (BPLR) no later than June 30, 2011.
Though the new system of loan pricing, or the base rate, came into effect from July 1, RBI norms allow existing customers to continue with the BPLR regime. Bankers said it would be difficult for them to have two loan pricing systems for long-term loans and wanted all the loans that were priced with reference to the BPLR system to be shifted to the base rate mechanism.
In addition, bankers have also requested RBI to consider if the interest rate on loans under the corporate debt restructuring (CDR) mechanism can be kept outside the base rate purview. This is because RBI has not allowed sub-base rate lending, except to a few sectors, and rates for loans under CDR may be lower than the base rate. Most banks’ base rate is in the range of 7-8.25 per cent.