Highest Ever More than 10,000 New Branches Opened during 2013-14
The Union Finance Minister Shri P. Chidambaram said that the last Financial Year 2013-14 was a difficult year even though there was positive movement towards greater stability. The Finance Minister expressed the need for structural reforms to tackle the problems of inflation especially food inflation which can't be tackled through fiscal and monetary policies alone. He said that tough measures need to be taken against wilful defaulters. He said that position that 'promoter is prosperous but company is sick' is not acceptable. He asked the banks to form a consortium and take joint action against such defaulters.The Finance Minister was speaking while reviewing the Annual Performance of Public Sector Banks (PSBs) and Financial Institutions (FIs) for the Financial year 2013-14 here today. Among those participated in the meeting include Shri Namo Narain Meena, Minister of State for Finance, Dr. Gurdial Singh Sandhu, Secretary, Department of Financial Services, Ms Snehlata Shrivastava, Additional Secretary, DFS, CEOs/CMDs of Public Sector Banks(PSBs) and Financial Institutions(FIs) along with other senior officials of the ministry. Issues related to Non-Performing Assets (NPAs) of PSBs and measures for prevention of new accretion to NPAs were discussed. Flow of credit to the agriculture sector including priority sector lending, education loans, minority lending, MSME credit were high on the agenda and discussed. In addition, issues related to stalled projects, new projects having a bearing on the functioning of PSBs and progress on financial inclusion were also discussed.
The 2013-14 Annual Results of 19 PSBs which have been declared so far were analysed at the meeting. As against the stated target of 40% Adjusted Net Bank Credit (ANBC), the Public Sector Banks (PSBs) have done Priority Sector Lending (PSL) to the extent of 37% of ANBC. Within the PSL, the advances to weaker section have been at 10.6% of ANBC as against the stated target of 10% and minority lending has reached a level of 16.09% as against the target of 15%. The number of students availing Education Loan has gone up to 25.72 lakh accounts with a credit outstanding of Rs.58,265 crores.
Banks have also done lending of Rs.7,511 crores to Micro and Small Enterprises during the year 2013-14. Out of this, the percentage of allocation to Micro Enterprises is 52.81% and there has been a growth of 14.15% in terms of number of Micro Enterprises covered during the year. In terms of credit growth to MSE growth has been 23.01% during the year.
The housing sector including Priority Sector Housing has seen a growth rate of 18.4% during the year 2013-14 with a total lending of Rs.5.408 lac crores to housing sector. The total outstanding as on 31st March to housing sector by Public Sector Banks is Rs.3.72 lakh crores. NPA in housing loan has reduced from 1.8% in financial year 2012-13 to 1.47% in financial year 2013-14.
It was noted that banks have opened more than 10,000 branches during 2013-14 which is the highest ever. Out of that, PSBs alone have opened 7,840 branches in the country in 2013-14 which is a major improvement from the average 4,000-4,500 branches that they normally open every year. Moreover, banks have set-up more that 25,000 on-site ATMs which is two and a half times the 10,000 ATMs that they usually set-up every year. Besides it, more than 15,000 ATMs have been opened off-site and thus, more than 40,000 ATMs have been opened during 2013-14.
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The slowing down of the economy has impacted the results of the banks. Year on year Deposit growth of 19 PSBs as on 31st March, 2014 was 11.43% and Advances growth was 10.69%. Gross NPAs had increased and net profit had decreased vis-a-vis the performance reported in 2012-13.
The sluggishness in the domestic growth during the recent past and the tepid recovery in the global economy have impacted the NPAs. Gross NPAs of PSBs have risen from 3.84 per cent as on March, 2013 to 4.44 per cent as at the end of March, 2014. However, from a peak of 5.07 per cent, GNPAs in the third quarter ending December, 2013, these have come down to 4.44 per cent (provisional) in the last quarter of the year ending March, 2014. The top 30 NPAs of PSBs account for 40.2 % of their GNPAs. The CEOs of PSBs reported the measures being taken to bring down the NPAs. The Finance Minister asked them to redouble their efforts on recovery and take tough measures against wilful defaulters.
Retail inflation jumped up to 8.6% in April from 8.3% in the previous month as food inflation rose to 9.8%. While vegetable and fruit prices contributed 50% to the rise in inflation, core inflation remained unchanged in April. As growth picks up this year, higher demand will limit any downside to the core. However, even if retail inflation hovers between 8.3% - 8.8% in the coming months, the RBI is likely to hold its ground in its meeting in June 2014 till the underlying inflation momentum is evident.
Weakness in domestic demand continues to persist for now. Industrial production data disappointed yet again declining 0.5% in March. Assuming construction sector output grew at the same pace as the first 3 quarters, 4QFY14 GDP industry growth would be barely 0.4%, and suggests a possible downward revision in FY14 GDP estimates.
On the external front, external demand helped revive exports in the month while imports continued to decline. This resulted in a lower current account deficit of $10.1 billion in April 2014 from $17.7 billion in the corresponding month of last year.
Growth is expected to pick up this fiscal to 6% closing the gap with potential output. This implies that the output gap is likely to reduce this year, and higher demand is likely to cap any considerable fall in core inflation. Inflation in items such as clothing, bedding & footwear, medical care, education, recreation, personal care and household requisites (60% weight in core) are likely to remain sticky.
In the months to come, high inflation in food articles such as vegetables, fruits, milk & milk products will keep retail inflation around the current level. An enhanced possibility of an El Ni in 2014 could push up CPI inflation with the weight of agriculture-related articles accounting for 50% of the CPI. However, on the upside, inflation is likely to be capped as the lagged impact of previous rate hikes seeps through and a strong base effect from last year lowers headline inflation. Balancing these risks, we expect headline inflation to hover between 8.3-8.8% in the coming months. With the RBI recently re-emhapsing its intent to lower inflation to 8% by January 2015 and to 6% by January 2016, we expect the RBI to keep rates on hold for now - standing in a wait and watch mode.
Some improvement in investment climate is forthcoming due to the gradual release of stalled infrastructure projects and a pick-up in mining output. Under the assumption of a decisive political outcome in the elections and a normal monsoon, industry could see some revival. The foremost risk to FY15 currently is from a subnormal monsoon which could impact farm incomes and demand, and have spill-over effects on industry via higher input costs. As per CRISIL Research estimates consumption and export-oriented sectors are expected to improve performance in FY15, while infrastructure-led sectors could also see some uptick. In the scenario of a fractured political outcome, the sectors that are linked to investment could take the biggest hit, while a weak monsoon could mar prospects for consumption-driven sectors.
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