It seems that bank are going to be successful in achieving non food credit target of 16% as set by the Reserve Bank of India for the current fiscal. In order to achieve the target banks have geared speed in disbursing all loans that that were pending to get sanctioned. Added to this is the race of banks to push short term loans as the fiscal is approaching an end.
Banks had been skeptical about being successful in achieving the target set by RBI owing to competition from alternate non banking sources of funding and internal resources of the corporates coupled with economic slowdown on credit in the initial months of the fiscal.
However, as the year is approaching towards an end, the bankers have again gained hope of achieving the target following the increase in number of credit takers who area approaching for loans to meet their credit targets. Short term loans to top corporates having tenor between 15 days to a few months have been reduced to rates as low as 4-6 %.
Another major reason for these banks to increase the number of credits is the performance incentive linked for top executives of the banks with relation to the amount of credit granted.
"Banks may end the financial year with 15.5-16 per cent credit growth. We have seen credit demand coming in from sectors such as infrastructure (roads and ports), cement, real estate, automobile companies, and home and auto loans. Next year, credit is expected to grow in the 18-20 per cent range on the back of broad-based appetite for funds from segments such as capital goods, export-oriented units, and petrochemicals," said Dr Rupa Nitsure, Chief Economist, Bank of Baroda.