Bank loan

Banking sector expected to experience robust loan growth this year (BoM MD)

As COVID-related concerns wane, the banking sector is expected to register robust growth in the current fiscal year thanks to stable macroeconomic conditions and growth-oriented government policies, said the chief executive of the Bank of Maharashtra (BoM), AS Rajeev.

The banking sector is at an inflection point, with COVID-19-related issues giving way to regenerating demand across all industry segments and general optimism in the economy, Rajeev told PTI.

The banking sector seems to be in an ideal situation and should show good growth in the current year, provided that there are no external problems like a new wave of COVID-19 and sustained geopolitical tensions. , did he declare.

As for the retail segment, Rajeev said, the housing sector is doing very well, but there are some problems with car loans due to the shortage of chips.

Expressing optimism, he said sales should pick up later in the year as the chip shortage issue is resolved.

Loan growth in the agriculture sector is double digits and a good monsoon would also generate demand in rural areas, he said.

“Demand from the corporate sector has also started to pick up, with the exception of the manufacturing sector. I feel that with a push for government investment in the budget, this would boost demand from the manufacturing sector,” said Rajeev.

Finance Minister Nirmala Sitharaman has increased capital expenditure (capex) by 35.4% for the financial year 2022-23 to Rs 7.5 lakh crore to continue the recovery of the pandemic-stricken economy thanks to to public investment. The capex for the past year was pegged at Rs 5.5 lakh crore.

Once the Russian-Ukrainian war is over and crude prices stabilize, the upward bias on interest rates should also ease, he said.

It should be noted that no public sector bank (PSB) suffered a loss during the period April-December 2021-22 and recorded a collective net profit of Rs 48,874 crore during this period.

Public sector banks made a combined net profit of Rs 31,820 crore in 2020-21. However, there have been collective losses for five consecutive years from 2015-16 to 2019-20.

The highest amount of net loss was recorded in 2017-18 at Rs 85,370 crore, followed by Rs 66,636 crore in 2018-19; Rs 25,941 crore in 2019-20; Rs 17,993 crore in 2015-16 and Rs 11,389 crore in 2016-17. From 2009-2010 to 2014-2015, PSOs were making a profit on their books.

To improve the financial health of PSOs, the government has implemented a comprehensive 4Rs strategy – transparent recognition of NPAs, resolution and value recovery of distressed accounts, recapitalization of PSOs, and reforms of PSOs and the financial ecosystem at the broad sense – for responsible management and clean system. Comprehensive measures have been taken as part of the 4Rs strategy to reduce PSB NPAs.

As part of the strategy, the government infused Rs 3,10,997 crore to recapitalize banks over the last five fiscal years – from 2016-17 to 2020-21, of which Rs 34,997 crore came from budget allocation and Rs 2, 76,000 crores through the issuance of recapitalization bonds to these banks.

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