Lender cuts credit growth forecast to 22%, as against 25% seen earlier.
The lack of pick-up in credit offtake so far this year has forced Union Bank of India to reduce its loan growth target for 2009-10. M V Nair, chairman and managing director, said that the bank has reduced its credit growth target to 20-22% from 25% set at the beginning of the year.
“Certain sectors have picked up but not as we expected. We had set a 25% target for this year, higher than the RBI target of 20% but our credit growth is still low at 18.3%, we expect to close this year with a growth of 20-22%,” he said.
Latest data from the Reserve Bank of India (RBI) shows that bank credit is lagging this year with only a 14% year-on-year growth so far.
Bankers are expecting credit to pick up in the second half of the fiscal (October-March) as the economy gets into better shape and the festival season kicks off with Diwali in October. Nair said that he expects demand for retail loans to pick up in the festival season.
“Demand for home loans is picking up week-on-week, and we are also seeing some demand for auto loans, but that is a very small part of our portfolio. Our expectation is that the demand for home loans will pick up with the festival season,” he said. Nair, however, said that deposit growth has continued to be strong despite deposit rate cuts by banks. “The growth is coming mainly from time deposits (fixed deposits) because even if rates have been cut, they are still more attractive than the savings rate,” he said.
Banks have cut deposit rates by 2.5-3% in the last six months.
For example, banks offer a 6.5-7% rate on a one-year fixed deposit now, as compared to 9.5-10% earlier.
Union Bank has raised Rs 500 crore by selling Tier-II bonds, which is mostly long-term debt equal to the size of Tier-I capital.
TY Prabhu, executive director, said the bank may raise a further Rs 500 crore out of its Tier-II headroom of Rs 2,500 crore if credit growth picks up next month.
Meanwhile, Union Bank said it has earned Rs 150 crore this year on revenues through use of technology like fees for cash management, currency chest, mobile banking and ATMs.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
)
)
)
)
)
)
)
)
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}