Credit Growth Unlikely to Be Affected by the Up Cycle in Interest Rates: Banking CMDs

HIGHLIGHTS

  • EXPECT 8%-10% CREDIT GROWTH FOR BANK OF INDIA IN FY23: BOI MD
  • DON’T EXPECT AN IMMEDIATE TRANSMISSION TO MCLR-RELATED INTEREST RATES IF RBI HIKES REPO:MD
  • TARGET TO OPEN 200 BRANCHES ACROSS INDIA TO CAPTURE RETAIL GROWTH OPPORTUNITIES: UCO BANK MD

(By Meghna Mittal)

New Delhi: Public sector banks are of the view that the cycle of rising interest rates is unlikely to impact credit growth in India, two doctors told ET Now. Bank of India MD, Atanu Kumar Das, said credit growth is not sensitive to rising interest rates and as economic activity picks up, demand will drive credit growth. He said Bank of India expects credit growth of 8-10% in FY23.
With the RBI MPC meeting scheduled for June 6-8, it is likely that interest rates will be raised again. Das said lending rates could be partly affected by a likely increase in repo rates, but the bank does not expect a 100% pass-through of monetary policy rates to the cost of borrowing.
Uco Bank MD Soma Sankara Prasad told ET Now that the impact on the cash portfolio in the first quarter of FY23 is concerning and that the bank expects huge market value losses during this trimester.

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On credit growth, he said interest rates alone don’t drive credit growth and he doesn’t see a major impact over the next few months on the bank’s credit growth. With the COVID-19 slowdown, he expects private consumption to be boosted.

Regarding the up cycle in interest rates, Prasad said that 37% of lending rates are linked to repo in which the rate hike will be immediately passed on. MCLR-linked lending rates will not be increased immediately with the next rate hike by RBI.

In FY23, Uco Bank will focus on opening 200 branches across the country to tap the potential of retail lending. The bank expects 70% growth in retail, agricultural and SME credit in FY23. In business credit, the bank expects growth in the segments of l below, steel and cement.

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Uco Bank aims to raise gross NPAs to 6% by March 2023, from 7% currently, and net NPAs to 2% by March 2023, from 2.79% currently.

Prime Minister Narendra Modi today launched a portal to take advantage of government credit-related schemes. BOI MD Das said that the creation of this online credit portal is like a one stop shop for loans and will be a game changer.

Stephen V. Lee