PSB lending to state-run companies dips

Written by Pradip Kumar Dey | Updated: Jan 6 2009, 06:02am hrs
Public sector bank (PSBs) advances to state-owned companies grew at a slower pace in 2007-08 as compared to 2006-07, a study by FE has revealed. The study found that lendings of 28 PSBs to public sector undertakings (PSUs) rose by 16.6% in 2007-08, as against 25.8% in 2006-07. Overall, credit growth during the study period decreased from 30.1% to 25%.

In terms of absolute figures, PSB advances to PSUs rose from Rs 1.13 lakh in 2005-06 to Rs 1.67 lakh crore in 2007-08. The ratio of advances to public sector companies to total advances decreased from 10.29% to 9.28%.

This reflects a shift in portfolio during the last few years, wherein PSBs have focussed more on lending to retail customers, said an analyst from a rating agency.

Among the 28 PSBs that constituted the study, ten banks showed more than 50% increase in advances to PSUs in 2007-08 as against five in 2006-07. On the other hand, six PSBs showed a decline in their advances to PSUs in 2007-08 as against seven in 2006-07.

Around 57% of PSBs saw their lending to PSUs increase at a rate higher than the average for the 28 public sector banks that constituted the study. This figure was 39% in 2006-07.

The highest increase in advances to PSUs in 2007-08 was seen in the case of Indian Bank. The numbers increased from Rs 1,257 crore in 2005-06 to Rs 5,356 crore. On the whole, the banks advances in 2007-08 registered a 56.4% over 2005-06 levels; it was Rs 39,839 crore in 2007-08 as compared to Rs 22,485 crore during 2005-06. Indian Banks ratio of advances to PSUs to total advances increased from 5.59% to 13.44% during the period.

Corporation Banks advances to PSUs increased from Rs 2,113 crore to Rs 4,266 crore during the study period. Bank Of Baroda advances to PSUs also saw a steady rise: from Rs 5,430 crore in 2005-06 to Rs 13,527 crore in 2007-08. SBI, the largest public sector bank, showed a 15.2% decline in advances to PSUs in 2007-08 as against an increase of 18.6% during 2006-07. The banks ratio of advances to PSUs to total advances decreased from 10.29% in 2005-06 to 7.96% in 2006-07, but increased to 9.28% in 2007-08.