By IANS
Bangalore : With no respite in interest rate, consumer credit offtake in the banking sector has declined sharply during the first six months of this fiscal (2007-08), ICICI Bank Ltd managing director and K.V. Kamath said here Thursday.
“Consumer credit business has slackened this fiscal. It is growing between five-10 percent this year as against 30-40 percent over the last five years. We see real slackness in consumer credit offtake due to higher interest rate,” Kamath told IANS on the sidelines of a function.
The banking sector witnessed about 30 percent growth in consumer credit business in the last fiscal (2006-07), with the cumulative offtake at Rs.2-2.5 trillion. If the same growth continued this fiscal, it would have been a huge driver for credit growth in the first six months.
Referring to the tepid credit offtake during the first half (April-Sept) of this fiscal (FY 2007-08), Kamath said corporate credit flow also remained subdued due to various factors, albeit positive.
“As corporate India has been flush with cash flows, there has been a slight dip in bank lending. Profitable firms are comfortable to draw from their cash flows for investment rather than borrowing from banks. Though it is not so good news for us, it is certainly good news for the country,” Kamath pointed out.
Moreover, India Inc is looking beyond the domestic market to expand its business through organic or acquisition route. Big-ticket firms are scouting for global opportunities to drive growth.
As the largest private sector bank in the sub-continent, ICICI Bank has taken a major initiative to counter the slackness in corporate and consumer credit off-take by moving into international banking and hard-selling corporate/project finance business.
“We have activated our corporate finance business and seen strong growth during the first two quarters after going international. We have ways to balance our credit portfolio to sustain growth,” Kamath noted after the delivering keynote address at the 15th Quality Summit, organised by the Confederation of Indian Industry (CII).
Kamath admitted Indian banks would have collectively taken a hit of 1.5 percent on interest income due to increase in cash reserve ratio (CRR) from six percent to 7.5 percent this year.
The Reserve Bank of India (RBI) has raised the CRR for the sixth time Tuesday by 50 basis points (0.5 percent) from seven percent.
“We are concentrating on fee income and generating structures to compensate for the loss on the deposit system at zero percent with the central bank,” Kamath affirmed.