State Bank of India Chairman Rajnish Kumar has said the credit demand is expected to increase during the ongoing festive season, which will address the issue of poor demand amid the economic slowdown. He also said the demand for retail credit has picked up pace recently, and that the slowdown largely consists of corporate loans category. "We have seen that traditionally in the festive period between September and April the demand for credit peaks. There is a lot of hope ahead of this festival season," Kumar told reporters during the launch of SBI's new debit card financing programme, reported IndiaToday.In.
He also talked about the recent repo rate cut announced by the Reserve Bank of India, saying this could lead to a reduction in the interest rate for customers. He said the SBI was the first bank to link the external benchmark to the housing loans, small and micro-enterprise loans, and retail loans. Notably, the RBI in September had made it mandatory for banks to link all floating personal or retail loans to external benchmark from October 1. The move is expected to help in better transmission of policy rates, which is not happening under the current marginal cost of funds based lending rates (MCLR) regime.
Kumar said the preliminary data from shopping centres reveals the credit growth has increased and it would reflect in the growth data soon. Last month, Rajnish Kumar had said that October and November months would be crucial for the Indian economy and that these months would determine if the current economic slowdown was "cyclical or structural".
India is facing one of the worst economic downturns in decades. Its gross domestic product for the April-June quarter slipped to a six-year low of 5 per cent as compared to 5.8 per cent in the previous quarter. Comparatively, China, which is a much larger economy than India, had recorded a GDP growth of 6.2 per cent during the April-June period. Though the government has come up with measures to reinvigorate the sluggish economy, including slashing of corporate tax and announcing packages for the export and real estate industries, the results of these initiatives are yet to be seen.
Edited by Manoj Sharma