Credit offtake likely to rise in second half of this fiscal: Bhatt

Credit offtake likely to rise in second half of this fiscal: Bhatt
The Financial Express, October 23, 2009, Page 13

fe Bureaus, Hyderabad

The credit offtake in banks is likely to gather momentum during the second half of the current fiscal year. It will be much better than what the banking sector witnessed during the first six months of this year, said OP Bhatt, chairman, State Bank of India (SBI).

Speaking on the sidelines of a round table conference organised by Indian School of Business (ISB) in Hyderabad he said, “The retail sector in the country continues to be robust in the home loan and auto loan segments. However, the aggregate growth has been subdued. Over the past couple of months, we have seen companies hitting the market with their IPOs to part fund their capex plans. The other half has to obviously come from the banking sector. So, I personally feel that the credit offtake should pick up in the second half of the year.”

During the turbulent times, what the industry has seen is better management of working capital among corporates and more productivity among employees, he said.

He said, “I do not see any hardening or softening of interest rates in the near future. The inflation that we see today is not because of liquidity in the market place. Bulk of inflation is because of the food and food-related items,” he said. The excess liquidity that is there in the market has ensured that the banks keep their interest rates lower. And this has infact contained the cost of doing business to a great extent, he added.

On SBI’s acquisition plans, he said, “We are looking at acquisitions. But it is not our priority. In the current environment, we keep getting offers for acquisitions and we keep evaluating them. Acquisition is a good education for us and may be we will get something interesting.” Elaborating on the issue of consolidation in the banking sector, Bhatt said, the exercise has been thought about for the last five years. But apart from discussions on the pros and corns, nothing much has happened except for small mergers. “Last year, State Bank of Saurashtra got merged with SBI and this year we have clearance for merging State Bank of Indore. The merger exercise has kicked off a healthy debate on consolidation. In the process, some valid issues have been raised as to whether there is any risk to be a large bank and whether our banks are large enough to handle the issues related to consolidation say in terms of manageability, deliveries to the economic system and corporates,” he said. Commenting on the RBI committee’s suggestion to replace the benchmark prime lending rate (BPLR) system with a base rate mechanism, Bhatt said that it is a step in the right direction. “We have a plethora of PLRs and having a base rate in place of them would improve the transparency levels in the sector considerably,” he added.