Credit offtake is likely to increase in coming months following the Reserve Bank of India’s (RBI) measures to ease liquidity, said bankers.
“During September-October, there was an unprecedented liquidity crisis. Following RBI’s measures, we saw ample liquidity in November. It is likely to remain easy through this year as interest rates are falling. In fact, we could also see swelling of liquidity in coming months,” said Meera Sanyal, CEO, ABN Amro, at a banking summit in Kolkata on Saturday.
However, in spite of ample liquidity, demand constraints may check credit offtake, said bankers.
“Consumer confidence has taken a hit. The government should step in by spending more in core sectors like infrastructure. Earlier, we had seen a lot of government spending plans through schemes like debt waiver and the sixth Pay Commission. We want the spending to go to the infrastructure sector,” she said.
While banks are yet to assess the impact of the recent RBI measures, they are confident that credit to sectors like small and medium enterprises (SMEs) will increase in coming months.
According to S C Gupta, chairman and managing director, United Bank of India (UBI), demand for credit from the SME sector and housing has already started picking up.
“Credit demand from the SME sector has already picked up. As bankers, we are not creating demand, but meeting the demand. Further, because the interest rates are going south, there is bound to be good credit offtake,” said B K Piparaiya, general manager, Bank of Maharahtra.
However, textile and other export-oriented sectors, which have been hit by the economic crisis, may find it difficult to get funding from banks.
S Balasubramanium, chairman and CEO, City Union Bank, said sectors like textile may see cancellation of export orders in coming months, though the exact position could be assessed only after six months.
“It is not true that banks are not lending, rather there is not much demand,” said Balasubramanium. City Union Bank is also planning a 50-basis point reduction in lending rates by the end of this month. It is also planning to reduce deposit rates soon.
While City Union Bank witnessed a 35 per cent rise in credit growth in the last financial year, this year the growth has been in the range of 10-12 per cent so far. However, the bank is hopeful of clocking 20 per cent credit growth by the end of this financial year.
