The country’s third-largest lender Punjab National Bank (PNB) has said that it targeting a growth of 20 per cent in credit in the next financial year.
In the nine months ended December 2008, the state-owned bank’s credit grew by 39.3 per cent from a year ago.
However, the bank’s chairman and managing director K C Chakrabarty also said that the next financial year will be challenging in the light of the global financial crisis and a sharp decline in demand for products, services and even credit.
“There is also the risk of a rise in bad loans and, hence, the bank will be more cautious in extending loans in the next financial year. We will focus on ensuring more productive use of credit,” Chakrabarty told reporters on the sidelines of a banking technology seminar organised by the Confederation of Indian Industry (CII).
“Globally, credit will be scarce. Money flowing into India will also come down. The same amount of credit should be more productive,” he added.
Pointing to the risks of defaults, he said that his bank will not extend credit to over-leveraged and over-adventurous borrowers. On cutting its lending rates further, Chakrabarty said there is always scope to improve working and cut costs, the benefits of which could be passed onto the customers.
“The bank will examine if it can reduce its benchmark prime lending rate further, if the Reserve Bank of India cuts interest rates further,” he said.
PNB had cut its benchmark prime lending rate by 50 basis points to 11.50 per cent in February. Since November, the RBI has cut its repo rate by 400 basis points, reverse repo rate by 250 basis points, and cash reserve ratio by 400 basis points.
Chakrabarty emphasised on the need for low-cost technology banking products that can be affordable for and accessible to the poor.
Taking a dig at software companies, Chakrabarty said, now that the overseas business is shrinking, these companies should make products which suit the domestic banking and financial institutions.
Chakrabarty said he wanted information technology companies to take cognisance of these issues and come out with better banking products.
