Robust growth in bank loans

August 29, 2008	(Be the first to rate this story!)  Loading ...
Print This Story   Email This Story Subscribe Newsletter

Indian banks are witnessing a robust growth in loans According to the latest data released by RBI; bank loans touched Rs 24, 40,078 crore as on August 15. This means that loans disbursed by banks have vaulted Rs 78,214 crore since end March 2008 compared with a growth of only Rs 9,132 crore in the same period a year ago. The annual loan growth at the current levels work out to 26% compared with close to 23% a year ago.

The Banking sector attributes the loan demand to a combination of factors. With the slide in the stock markets, companies are now approaching banks again to fund projects. Besides, state-owned firms are trying to meet their working capital costs on account of high input costs, which is also fuelling the demand to an extent. According to Punjab National Bank chairman and managing director KC Chakravarty, not only is the demand being largely fuelled by state-owned companies, but there is good demand from the infrastructure sector as well. Banks, which have surplus bonds may even offload a portion of their stocks to fund loans, he said.

Bank of Baroda chairman and managing director MD Mallya said the deceleration appears to be confined to a few segments such as personal loans, consumer goods and real estate loans. “We are seeing drawdowns for projects that are already under various stages of implementation. We are not seeing any projects being shelved,” Mr Mallya said. A part of the demand could also be due to higher working capital requirements by firms as input costs have also gone up substantially due to soaring commodity prices.

Even though banks may be raising more resources though deposits, the central bank has hiked the reserve requirements — a portion of deposits that needs to be mandatorily parked with the central bank. As a result, banks need to sell surplus bonds to meet the loan demand.

News Published Under:   Banking and Finance |

Comments