Banking biggies also tell RBI that the economy is likely to grow 6.5 per cent
With recovery in select industrial sectors and improvement in rainfall, banks expect credit offtake to grow 20 per cent and the economy to rise 6.5 per cent in the current financial year. They also expect the gross domestic product (GDP) to increase 6.0-6.5 per cent.
At a meeting with Reserve Bank of India (RBI) governor D Subbarao and Deputy Governor Usha Thorat today, chief executives of big Indian banks presented their assessment of economic growth and other monetary indicators as the first half of the financial year draws to a close.
SBI Chairman OP Bhatt and ICICI Bank Chief Executive and Managing Director Chanda Kochhar were among those who attended the meeting.
Since the rate of credit growth has been steadily slipping since the beginning of 2009-10, the feedback (on 20 per cent growth) indicates that bankers expect a sharp revival in the second half of the financial year.
To meet the year-on-year credit growth projection of 20 per cent, banks will have to disburse an additional Rs 5,16,400 crore between September 2009 and March 2010. So far this fiscal, credit disbursal has grown 1.35 per cent over the figure at the end of the previous financial year.
The year-on-year growth in credit was 14.1 per cent till the end of August.
A senior banker who attended the meeting said RBI sought bankers’ perception about market conditions, including credit offtake and liquidity.
“A credit growth of 20 per cent can be attained as the industry growth is resilient. There is revival in certain industrial segments given the industrial production data,” said another banker.
The Bankers told RBI that interest rates would stay steady for the next few months, but might increase towards the end of the financial year. They also conveyed to the central bank that there was adequate liquidity in the system.
Besides helping in the formulation of the monetary stance for the second half (October 2009-March 2010), these inputs are expected to help RBI decide the timing of its money policy reversal.
Last week, Subbarao had said that RBI might reverse its current easy money stance before the central banks of other countries did it, due to inflationary pressures.
Any change in RBI’s monetary stance is expected to be announced in the second-quarter review of the policy scheduled on October 27, 2009.
In a related development, RBI Deputy Governor KC Chakrabarty has said that the Wholesale Price Index (WPI) inflation might cross 6 per cent by the end of the current financial year.
“The rise in WPI inflation rate has not come as a surprise to us. We have always said that by March next year, it will be 5 per cent. It may even cross 6 per cent,” Chakrabarty told reporters at a function in Mumbai today.
WPI inflation for the week ended September 5 had risen to 0.12 per cent from -0.12 per cent in the previous week.
