Banks in India may register a fall in the growth rate during the December-ending quarter, as the demand for loan from individuals and corporates showed a decline. In fact, this quarter posted the most dismal performance in loan disbursement for the last three years.
The growth in the banking sector has been on par with economic growth at a healthy 8% or above. However, all these are set to become history, when the results for the third quarter come out. The year-on-year growth for Q3 will be in disappointing negatives. This is a complete turnaround from the 19% Y-o-Y growth posted for Q2.
During the first two quarters of the current fiscal, banks rode high on low yield from government security bonds, which made it possible to rake in big profits on the treasury arena. However, all these changed in the third quarter with expectations of impending restrictions by RBI to counter inflation.
Bankers blame corporates for underutilization of their credit limit for the poor show. However, the silver lining is that though overall figures for Q3 are dismal, two-thirds of the loan offtake for the quarter materialized in December.
Shyamala Gopinath RBI deputy governor expressed optimism at the trend. She said, “With the economy posting strong growth in the second quarter of the year, credit demand could be expected to pick up, which has already started in the recent fortnights.”
Despite the optimism, RBI has scaled down the annual credit growth target from 20% to 18%. With the banks posting a growth rate of 7% in the first three quarters, it will be uphill task to achieve the impossible target. Boiled down to hard data, this means that banks have to lend another Rs.300,000 crore to make this a reality.
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