Banks go slow on credit push fearing bad loans

By Abhishek Anand  , New Delhi



  Despite lacklustre credit growth during the present financial year,
banks are reluctant to goout of their way to
push increased credit flow to companies
 because they fear that it might result in increase in bad debts.
 A few banks that Financial Chronicle spoke with are of the view
that trying innovative ways to push credit growth could result in
compromising on quality of loan, which in turn may result in higher
non-performing asset (NPAs) for banks.

“Pushing artificially for credit off-take, may result in higher
non-performing assets,” A C Mahajan, chairman and managing director,
Canara Bank, said.

At the same time, Mahajan is optimistic of improvement in credit
demand going forward. “We are witnessing some improvement in credit
demand and are of the view the situation would improve further in
coming months,” he said.

Other bankers agreed with Mahajan. S Raman, executive director,
Union Bank of India, said, “We are not going to try too many things
to push up credit demand because that may result in deterioration of
the quality of assets for the bank. In fact, we have already reduced
credit disbursement target from 25 per cent to 18 per cent.

The first two quarters have witnessed very low credit off-take.”

C M Khurana, general manager, Oriental Bank of Commerce, said he
is hoping for higher credit pick-up in the days to come.
“As far as lending to companies is concerned, we are expecting
improved demand going forward,” Khurana said.

He said the bank’s retail credit was growing at a healthy pace.
 “Housing loans clocked a year-on-year growth of 28 per cent and
education loans at more than 30 per cent,” Khurana said.

According to the latest RBI data, for fortnight ended November 6,
 credit expansion by all banks put together increased by 9.07 per cent
at Rs 2,873,062 crore, compared with Rs 2,612,401 crore in the
corresponding fortnight a year ago. This is lower from the credit
off-take during the past financial year, where the credit grew at
a staggering 29 per cent year-on-year.

Source: Financial Chronicle