The effects of economic slowdown across various segments of the consumption economy that had a major impact on credit growth in domestic banks is gradually fading as consumers are back to spending with the arrival of festival season, said State Bank of India chairman Rajnish Kumar.
“We have seen that traditionally in the festive period between September and April the demand for credit peaks. There is a lot of hope ahead of this festival season” Kumar told reporters. “Retail credit is growing slowly, and the loan slowdown is more on the corporate side. Based on preliminary data the footfall at most shopping centres is back and it will soon be reflected in growth data as well. The demand for retail credit has picked up.”
While speaking at the launch of SBI’s new debit card financing programme where the bank announced strategic alliance with 100 top consumer and electronic brands to give pre-approved financing options to customers.
Kumar further said that the problem of Non-performing assets (NPAs) has been blowed out of proportion and the situation isn’t as worrisome as being displayed and on the contrary it is recovering. The Gross NPA ratio of state-run banks dropped to 10.1 percent by December 2018 from 11.5 percent in March 2018. SBI will be announcing their second-quarter earnings result later this month on 25th October.
The lender in the past month has been organising customer outreach programmes such as loan melas to boost the process of loan disbursement. These measures are introduced with an aim to revive the credit demand in the economy, which has seen a slowdown since April due to hampered consumer confidence.
Cost of funding could also do better with the Reserve Bank of India’s cutting down of the repo rate or cost at which banks fetch credit from the central bank by 25 basis points last week taking the total since February to 135 basis points. A basis point is 0.01 percentage point.
“We were the first to link external benchmark to floating interest rates on our housing loans,” said Kumar. “We have since also linked small and micro enterprises loans and retail loans to these externally linked floating rates which are decided on a quarterly basis.”