Weak monsoon could hit demand for loans | business | Hindustan Times
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Weak monsoon could hit demand for loans

business Updated: Jun 29, 2009 21:24 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times
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Just when bankers were seeking to push up credit offtake hit by a year-long industrial slowdown, they are faced with a truant monsoon.

Bankers and experts say that demand for loans — both industrial and retail — is likely to be pulled down by the delayed monsoon, which casts a shadow on consumption patterns, rural incomes and overall economic growth.The threat of a sub-normal monsoon comes at a time when the stimulus packages pushed by the government to boost consumption were starting to show results.

Analysts say it is too early to assess the real impact, but a sub-normal monsoon could chip off GDP growth by a couple of percentage points.

On first reckoning, credit growth was expected to be around 24 per cent in the fiscal year, with the budget likely to put the figure for farm loans around Rs 3.25 lakh crore.

World Bank’s lead economist for India, Dipak Dasgupta, told Hindustan Times that a supply shock in food grains would impact credit offtake. “However, a strong financial system should be able to offset the problems which may arise of the situation, though the creditworthiness of borrowers may be in question,” Dasgupta said.

Bank of Maharashtra chairman and managing director Allen CA Pereira said it was too early to press the panic button.

“But in case rains further get delayed, demand for agriculture credit would come down as sowing will be deferred and the level of rural incomes would be impacted. This would certainly result in less demand for certain consumer goods,” he added.

Mahesh Purohit, director, Foundation for Public Economics and Policy Research said that there would be less demand for inputs and outputs.“We could see non repayment of agriculture loans go up as well,” he said.