Public sector banks are likely to increase their targets for credit growth in the next fiscal year even though current signs show moderating demand, senior industry sources say.
The government is keen to increase credit outflow to sustain growth. For the current year, the banks had set a 24 per cent growth target.
Credit flow towards several sectors such as housing and automobiles has significantly decelerated in the wake of the economic slowdown. One bank chief executive said that demand was unlikely to grow until prices soften. Though the official wholesale price-based inflation has come down in the last few weeks, consumer prices are still on the higher side, and prices have not softened as such.
According to Reserve Bank of India data, state-owned banks have registered an increase in credit flow of about 29 per cent in the first nine months of the current year compard with a year ago, up from 20 per cent despite the severe liquidity crunch that the banking industry witnessed until a couple of months ago. Foreign and private sector banks have, however, seen a decline in outflow during the same period, primarily due to fund constraints.
MD Mallya, chairman and managing director, Bank of Baroda said, “We have already exceeded our credit target for this year and we will be able to maintain the same level for next year as well.”
“We will definitely consider increasing our credit growth target for next year. We have already achieved our target for the current year,” said Allen Pereira, Bank of Maharashtra's managing director.