Bangalore: Growth in advances by Indian banks was better than last year, Reserve Bank of India (RBI) deputy governor V. Leeladhar said on Tuesday when asked whether high interest rates were hurting loan growth.
Good progress: RBI deputy governor V. Leeladhar. Bank data show loans by Indian banks as on 1 August were 25.8% higher than a year earlier. Photograph: Hemant Mishra / Mint
The credit growth has so far been healthy though retail lending has slightly slowed down, he said, adding farm loans were expected to pick up. “The growth of advances are far better than what it was last year. Something like 26% against 20%, which we have been projecting,” he said.
RBI raised its key lending rate to a seven-year high of 9% in July to rein in double-digit inflation. Higher rates may slow down credit growth, though that could not yet be determined, he said. Loans by Indian banks as on 1 August were 25.8% higher than a year earlier, RBI data showed.
Asked whether banking sector reforms to allow foreign competitors to buy local banks were on track to be unveiled next year, Leeladhar said it all depends on the review. “I can’t foresee what will be the findings of the review,” he said.
Meanwhile, State Bank of India chief O.P. Bhatt said the bank’s plans to merge with its seven associates would depend on how the merger proceedings with the State Bank of Saurashtra go. “We will wait and see how the merger proceeds. We will take it from there,” Bhatt said.
Deepti Chaudhary contributed to this story.