Low credit demand an area of concern, says banking secretary

hidden January 02, 2015 19:41:59 IST
Low credit demand an area of concern, says banking secretary

Pune: Acknowledging that bad loans are "problem area," Financial Services Secretary Hasmukh Adhia today said the low demand for credit is an area of concern and there is need to increase the same.

"Yes, I agree the low credit offtake is an area of concern," he said at the inaugural briefing of two-day bankers' retreat kicked at the NIBM campus here.

Low credit demand an area of concern says banking secretaryHe said the bankers will be discussing the lower credit offtake and strategies to increase the same at the Gyan Sangam organised here.

It can be noted that in spite of a push to economic growth, there is not enough of demand for credit, leading to credit growth barely rising above the ten per cent number, which is a five-year low.

During the first nine month of the current fiscal, credit growth has seen single digit increase at 5.2 percent while the deposits have growth at a higher pace of 7.6 percent.

A majority of banks have shifted focus to newer segments, especially in retail lending, to push credit offtake.

Bankers have been pinning hopes on the capacity expansions by corporates, expecting this will push up the
demand for credit. However, fresh capex loan proposals are coming few and far between.

The Secretary said that asset quality is an area of concern and there is a need to improve on risk management of the banks.

"Improving risk management, asset management and recovery ... this is one of the problem areas for many public sector banks. We would like to learn from each other and help them in building better risk management practices," he said.

In its bi-annual Financial Stability Report, the RBI has flagged the performance of the state-run banks as an area of concern on this count.

Total Gross Non Performing Assets (NPAs) of public sector banks stood at over Rs 2.43 lakh crore as on end- September 2014. The top 30 NPAs account for Rs 87,368 crore ie 35.9 percent of total gross NPAs of PSBs.

PTI

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