Toeing the Reddy line

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: restructure their earlier budgeted growth drastically. For most of the banks which were not happy with their results for the Q1 2009, it is now time for further mid course corrections.

Bank of India is looking at moderating its credit growth to 20-22% this fiscal from above 30% a year ago. The bank is stressing on more qualitative loans by discouraging the negative sectors with higher delinquencies, said a senior official of the bank.

MD Mallya, chairman and managing director, BoB, says his bank has already put due diligence in place in some of the retail sectors which were given priority in the bank’s 19 retail “loan factories” across the country.

MV Nair, CMD of Union Bank of India says there are two views how the high interest regime can check credit growth.

“The rise in the interest rates may result in the increase of delinquency, which can be handled only through monitoring of the entire loan mechanism. We as bankers have to look at maintaining the credit quality,’’ he says.

On Andhra Bank’s action plan, the newly-appointed CMD RS Reddy says: “We are revising the rates upwards on our individual products. Also, we want to increase the rates on those segments where the delinquency was higher. We are planning to charge higher interest rates in areas like mortgage.’’

The bankers are now confident that RBI’s policy would be effective and things would be brought under control and expect industry to do its bit.

Business sentiment polled by surveys reflects a more broad-based moderation in some cases, while others expected higher investments to take place. One survey reported slower growth expectations for output, foreign trade and pre-tax profits for the next six months. However, a majority of the respondent firms propose to increase investments during the current year. All this may now change.

Another survey reported a significant decline in business optimism due to increase in input costs, global economic instability and hardening of interest rates, but nearly half the respondents intend to increase their manpower. In yet another survey, nearly two-thirds of the respondents expected an increase in order books, exports and investment and nearly half expected to increase employment during April-September 2008.