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| Credit growth would definitely be slower than last year. It is likely to be around 17-18 per cent. It is not unusual, given the fact that there is monetary policy tightening.The slowing credit growth may intensify amid fears that the Reserve Bank of India (RBI) would raise interest rates further during the first quarter review next Tuesday. According to RBI data, banks disbursed nearly `1.5 lakh crore of loans during the first three months of the current financial year, representing a 3.75 per cent growth over March. This is much lower than the five per cent growth during the same period of the previous financial year. A year-on-year comparison also confirms the trend of slowing loan growth. On a yearly basis, credit growth stood at 20 per cent as on July 1, lower than the annual growth of 21.4 per cent at the beginning of the April-June quarter. RBI has projected credit growth of 19 per cent for financial year 2011-12. " Bankers said the high interest rate has already slowed disbursals in both retail and corporate segments. "Home loan demand has certainly come down due to the rise in interest rates. Prospective home loan customers are in a wait-and-watch mode. They are waiting for the rates to come down. Bankers also said the expansion plans of their corporate clients had taken a backseat. "There is a slowdown in credit growth in the current financial year, compared to the previous one. In the infrastructure space, for example, no new projects are coming up. Only a drawdown from earlier sanctions is taking place. In the first quarter of this financial year, RBI had raised the key policy rate, or the repo rate, by 75 basis points. State Bank of India (SBI), the countrys largest bank, had then raised lending rates by 100 basis points in two tranches in the first quarter, while most banks raised their lending rate by 50 basis points. The base rate, or the benchmark rate for loans below which banks are not allowed to lend, stands at 10.25 per cent for all major public sector lender, while for SBI it is 9.50 per cent. With RBI expected to raise rates further, banks are not sure if they can pass on the rise, and this would further impact loan demand. "By and large, I feel the RBI would go for another 25basis point rise in policy rates. Although the liquidity condition is getting better, it is still not very comfortable. |