SBI Q3 credit spike likely at 27 per cent

The resources-starved State Bank of India (SBI) is estimated to have witnessed a huge spike in its lending portfolio last December.

The year-on-year growth in the loans portfolio of the country's largest bank as on December 31, 2006, is likely to have jumped to 27 per cent from 21.18 per cent at the end of September 2006.

Analysts said SBI's loans portfolio expanded by nearly Rs 27,000 crore in the three months ended December 31, 2006. Most of the growth in the third quarter happened in the month of December, when the bank was lending aggressively offering a 50 basis points discount on all retail loans as a festival season offer.

"The bank witnessed a sharp rise in credit growth in December 2006 to substantially push up the year-on-year loans growth at the end of the third quarter," SBI sources said. The bank's advances had grown by 21.18 per cent year on year to Rs 2,88,840 crore at the end of September 2006. SBI will announce its third quarter results on January 23.

SBI's total loans outstanding at the end of March 2006 were Rs 2,61,642 crore, up by Rs 59,268 crore a year ago. The estimated increase in the third quarter will take the bank's loans portfolio to almost Rs 3,15,000 crore.

However, deposits continued to grow at a sluggish pace of around 12 per cent at the end of December, according to sources. The urgent need to tackle the dwindling growth in deposits has made the bank offer 8.25 per cent interest on all deposits of one year and above, just ten days after saying it will provide this return only on deposits of Rs 15 lakh and above.

A senior official of the bank had earlier said the bank might have to revise its target for credit growth on the back of an increasing growth in advances. Yogesh Agarwal, managing director (national banking group) of SBI, had said in November, "Credit is growing at 25 per cent and with the onset of the busy season, there are signs of a further increase in the growth in advances."

"The bank may revise the target (for credit growth) and there is a possibility that the bank's performance may be higher than the target set for 2006-07," Agarwal said. The bank's advances had grown by about 30 per cent in 2005-06.