While Indian banks are able to deploy credit over-enthusiastically in retail finance like personal loans, credit card overdrafts, vehicle loans, the key infrastructure sectors such as — telecom, power and roads — continue to witness negative growth, the Assocham has observed.
As per the data released by Reserve Bank of India (RBI), the personal loans portfolio has grown by close to 18 percent in the fiscal ended March 31, 2018, with housing and vehicle loans representing the lion’s share.
On the other hand, key infrastructures sectors have been witnessing degrowth, rather any uptick, showing a disconcerting scenario, marred by the twin balance sheet problems of the banks and the corporate firms, an official statement from Asscoham (Associated Chambers of Commerce and Industry of India) noted.
In 2017-18, the credit deployment growth in the power sector was minus 1.1 percent, telecom minus 0.6 percent, roads minus 7.5 percent, cement and cement products minus 3.1 percent, an official communiqué of Assocham stated.
Concurring with the view of RBI Deputy Governor N S Vishwanathan, who recently maintained that in the absence of any demand for credit and even the risk aversion by the lenders, the tendency on the part of the banks has largely been that of a ‘herd’, ASSOCHAM Secretary General D S Rawat added, “Banks are in a situation of ‘damned if they do, damned if they don’t do’.”
“The private sector companies engaged in the building of roads, power and ports and airports are bleeding with a huge debt and some of them are facing the prospects of even insolvency under the Insolvency and Bankruptcy Code (IBC). They cannot be expected to be seeking credits.”
“On the other hand, the banks have to lend to some sectors at least. After all, they are in the business of lending. Under the given situation, the retail trade, personal loans are the only sectors where there is a demand for money. But surely, as pointed out by the RBI Deputy Governor, they cannot be assumed to be free from risks, and the banks must do their due diligence, properly,” Rawat added.
Vishwanathan, while making note of ‘herd movement’ among bankers to grow retail credit and the personal loan segment’ is said to have earlier cautioned the banks to not just see the growing trend as the grand panacea for their problem-riddled corporate loan book, but to properly assess the cost of risks involved therein.
