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Saturday, September 5, 2009

economy and expect credit demand to pick up in the second half of the year. In this context, Subbarao emphasized the need to increase the flow of cred

Posted by Tip at 6:32 AM

economy and expect credit demand to pick up in the second half of the year. In this context, Subbarao emphasized the need to increase the flow of credit, particularly to agriculture and micro, small and medium enterprises. The banks were concerned that their liability structure is getting shorter with the reduction in the term structure of deposits, while the asset structure is getting elongated on account of the increasing share of long-term loans, particularly infrastructure. Several banks also indicated that the share of CAS A deposits has been declining, which would put pressure on their net interest margins (NIM). As regards credit quality, banks were of the view that NPAs are expected to increase, particularly, in the unsecured segments, although they will remain manageable. "Going forward, public sector banks emphasized the need for raising capital as risk-weighted assets expand in their asset portfolio," said Subbarao after a meeting he had with the chiefs of major banks recently.
There are now progressive signs of recovery in India. On the other hand, there are some negative signs: delayed and deficient monsoon, food price inflation, rebound in global commodity prices, continuing weak external demand and high fiscal deficit.

 

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