Banks' loans are set to grow at the slowest pace in a decade this financial year, as companies continue to shy away from borrowing in the current uncertain macro-economic environment.
Banks' year-on-year credit growth had dipped below 17 per cent in August and is expected to moderate further, bankers and analysts said.
"We could see loan growth for 2012-13 moderate to 14 per cent, a 14-year low," Rajeev Varma and Veekesh Gandhi, analysts with Bank of America Merrill Lynch, wrote in a note to clients. Bankers were not willing to comment on record because of the sensitivity of the issue but on condition of anonymity, they agree expanding their loan portfolios in the second half will remain a challenge.
"There is a slowdown, undoubtedly. There is hardly any growth in corporate loans. Even the demand for working capital finance is drying. Even if the Reserve Bank of India (RBI) chooses to cut rates on Monday (at its monetary policy review), this will not boost credit demand, as business sentiments continue to remain negative. Some relaxation in policy rates will only improve market sentiments," said an executive director of a Mumbai-based public sector bank.
While a few bankers were optimistic that loan demand would not decline further in the second half,
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