PSBs to raise credit up to Rs 22.5 lakh cr in current fiscal

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New Delhi: Coming to aid the slackening economy, public sector banks will increase their lending to about Rs 22.5 lakh crore in the current fiscal, up around 4% over the target fixed for them.

With the upward revision of their credit target by Rs 56,000 crore, banks are expected to lend about Rs 22.5 lakh crore by the end of current fiscal, the finance ministry officials said.

As per the ‘Statement of Intent’ submitted by all the public sector banks, credit growth was expected to be 20% during 2008-09 over the last year, they said. With the revision in the credit target by the government, credit disbursal would be 24% higher than the last year, they added.

Last week, finance secretary Arun Ramanathan had said, “We have three months more...we have enhanced the original (bank’s credit disbursal) plans by Rs 56,000 crore. So, we are planning to provide, in addition to the earlier plans, over Rs 56,000 crore.”

The target enhancement will benefit all sectors, including real estate, corporate, small and medium enterprises and non-banking financial companies, the officials said.

The decision of the government follows the announcement of the Reserve Bank to further reduce the key policy ratios and rates to unlock more bank funds and signal soft interest rate regime to neutralise the impact of the global financial turmoil on the economy.

Till December 19, the outstanding credit of commercial banks, including private sector banks, stood at Rs 25,92,418 crore to non-food sector.

The apex bank since October has released Rs 3,20,000 crore into the system, but unless the banks shed their reluctance to the lend, the benefits will not reach the industry. Acknowledging that the credit flow has slackened during October and November because of overall liquidity, Ramanathan had said advances by the the PSU banks have picked up in December.

The government, he added, has asked the public sector banks to enhance their credit expansion plans to ensure that productive sector gets adequate credit.

At the same time, the government will closely monitor the provision of the sectoral credit by the state-owned banks on fortnightly basis.

In addition to this, the government has drawn Rs 20,000 crore recapitalisation plan for the next two years to ensure that the banking system does not suffer from capital adequacy constraints.

The plan, which would be implemented next year, provides credit growth needed to sustain the economic momentum in 2009-10. At present, most of the PSU banks have adequate capital back up to expand credit growth.