Mumbai: Concerned over rising slippages in the industry, bankers on Tuesday sought an extension of loan restructuring facility and said more measures were needed to lift credit demand.
In a meeting with the Reserve Bank of India (RBI) governor D Subbarao ahead of the quarterly monetary policy end-July, bankers also demanded a relaxation in NPA norms in infrastructure lending and provisioning requirements in certain segments like housing.
They also informed the RBI that credit demand continues to be subdued in the face of the economic downturn but flow was likely to pick-up by September in line with the recovery in the economy.
“Though there are signs of improvement in economic activity, it is not showing in credit growth. We expect growth to pick-up in the second quarter,” State Bank of India’s chairman and Indian Banks’ Association’s deputy chairman, OP Bhatt, told reporters after the meeting.
Bhatt said the bankers have asked the apex bank to extend the deadline of loan restructuring facility to December from June. Early this year, RBI had announced the loan restructuring facility in certain sectors facing a slowdown like real estate up to 30 June.
Sufficient liquidity in the system and low inflation has provided further room to soften interest rates, Bhatt said, adding that rates are likely to stabilize in the next six months.
IBA’s chief executive, K Ramakrishnan, said bankers also requested the Reserve Bank to manage the government’s massive borrowing programme in an orderly manner so as to avoid any upward pressure on interest rates.
Despite a slow recovery in economic activity, small- and-medium firms continue to be reluctant to avail credit in the backdrop of the financial downturn, he said.
“Bankers told (the RBI) that real demand is yet to pick-up. MSMEs are hesitant to take credit from banks as they are not sure about a pick-up in business activities,” Ramakrishnan, who attended the meeting, said.
Bankers also said there was a need to look into NPA norms in infrastructure lending as loans offered to infra projects, are being termed as NPAs in the event of project delays.
Bankers who attended the meeting included Canara Bank chairman and managing director, AC Mahajan, IDBI Bank chief, Yogesh Agarwal, ICICI Bank’s managing director and CEO, Chanda Kochhar and Standard Chartered India head, Neeraj Swaroop.