Mumbai, Jul 7: Despite concerns expressed about the slowdown in demand for credit in a high interest rates scenario, Chairman of Indian Banks Association M D Mallya has said the industry will meet the targeted 19 per cent surge in advances this fiscal.
“The overall banking system will achieve a 19 per cent credit growth, the demand has not been affected as it is made out to be,” Mallya, also the Chairman and Managing Director of Bank of Baroda, told reporters on the sidelines of a book release here late last evening.
When asked about sectors showing some stress presently, he said, “There is a bit of a slowdown as far as new projects are concerned.”
Concerns have been raised in the past few days that the present high rates scenario can affect credit offtake in the system as projects get deferred or scrapped due to dearer credit.
The Reserve Bank has hiked its key rates 10 times since March 2010 in order to tame the inflation, which stood at 9.06 per cent in May 2011. The RBI has also said that it is ready to sacrifice growth in the short term in its pursuit of reigning-in inflation through rate hikes.
Advances by Indian banks grew 21.5 per cent in 2010-11 and in its annual monetary policy announcement, the RBI had projected a credit growth of 19 per cent in 2011-12.
Bank of Baroda will achieve its targeted advance growth of 23-24 per cent this fiscal as well, Mallya said.
“Last few years we have been achieving the number and this year as well, we will grow in that range,” he said. Answering a specific query on home loans, he said demand remains “steady” and BoB's home loan book has grown at a “consistent” 22 per cent.
When asked about vehicle loans, the second element of retail lending, he said it is too early to say that there is a slowdown and we will have to wait for the numbers to come in.
Experts have earlier opined that retail credit demand is the first to be affected as rates get hiked due to the direct impact it has on family budgets. In the case of vehicle loans, there is the additional worry of rising fuel prices which can lead to purchase decisions being put off. PTI