Money & Banking
Bankers want RBI to focus on growth, seek cut in repo, CRR

Bankers have asked the central bank for a cut in both repo and CRR in the upcoming policy review

Mumbai: Leading bankers met top brass of the Reserve Bank of India (RBI), impressing upon them the need to shift focus of monetary policy to growth and sought reduction in the repo rate and the cash reserve ratio (CRR) by 0.5%, reports PTI.


“While inflation concerns remain, growth is a bigger concern... so, while we understand the issues related to inflation at this point of time, it was our recommendation that there should be a rate cut so that growth comes first,” HDFC Bank's MD Aditya Puri told reporters.


Speaking after the customary pre-policy meeting with RBI brass, he said that bankers have asked for a cut in both repo (rate at which the RBI lends to banks) and CRR—the portion of deposits banks have to mandatorily park with the central bank—in the upcoming policy review.


CRR stands at 4.25%. Repo rate is at 8%.


“The bankers have urged the RBI to reduce interest rates by 50 basis points at least. Even the CRR should come down by 25-50 basis points,” Indian Banks Association (IBA) chief executive K Ramakrishnan said.


One basis point is equal to 0.01%.


The body’s chairman and CMD of Punjab National Bank, KR Kamath said the banks would reduce interest rates if RBI cuts policy rates in the coming policy.


“If the rate of interest is reduced, probably the transmission will happen. Bankers have already been saying that transmission will happen if there is a rate cut,” Kamath said.


He also said reduction in rates would help in increase in investment, which would boost credit growth.


Ramakrishnan said if both these rates are lowered, it will send a positive signal to market.


“If both these things (repo and a CRR cut) happen, transmission will happen and it will be a good sign to the market that growth is going to happen in a big way,” he said.


The likelihood of a rate cut became strong with manufacturing growth remaining in the negative terrain and WPI-based headline inflation hitting a three-year low at 7.18% in December.


Moreover, RBI governor D Subbarao had in the October policy as well as at the subsequent mid-quarter review had hinted at a rate cut in the January policy.


On the poor deposit growth, the IBA chief executive said bankers raised concerns regarding sluggish deposit growth along with low credit uptake. “Sluggish deposit growth is a matter of concern to the bankers. Credit is also not picking up the way it should and hovering around 8% now.”


According to Ramakrishnan, both bankers and the central bank are concerned about rising bad assets in the system.


About the recent suggestion to pay interest on current account, Ramakrishnan said there was a passing mention regarding this with the apex bank at the meeting.


RBI, bankers seek transparent systems for credit flow to MSMEs

As part of an earlier policy decision to look into the concerns surrounding the flow of credit to MSMEs, RBI deputy governor KC Chakrabarty held a meeting with chief executives of banks


Mumbai: To streamline flow of credit to small enterprises and ensure that rightful company gets the credit, bankers and the Reserve Bank of India (RBI) discussed introducing a transparent system for micro, small and medium enterprise (MSME) loan proposals, reports PTI.


"We discussed to put a proposal tracking system in place, give acknowledgement and SMS facilities to an applicant," Punjab National Bank CMD and industry body Indian Banks Association's Chairman KR Kamath told reporters outside the RBI headquarters.


As part of an earlier policy decision to look into the concerns surrounding the flow of credit to MSMEs, Deputy Governor KC Chakrabarty held a meeting with Chief Executives of banks.


"Various ways, in which the borrowers or applicants will feel that there is a response from the banks and bankers, will be put in place for monitoring the entire flow" were discussed at the meeting, Kamath added.


Corporation Bank Chairman and Managing Director Ajai Kumar said to give a thrust to the credit flow to the key sector, there is a need to have transparent systems in place.


"How to create structures and processes so that there is more transparency and applications are properly tracked, no application is rejected without any reason and there is a proper monitoring system at the level of the bank, were among the issues which were deliberated upon," he said.


HDFC Bank Managing Director Aditya Puri said given the importance of the sector, bankers have agreed to take all necessary steps to strengthen the credit flow.


"We will double the effort to push growth and provide enough support to the MSME sector...they need more credit and help and bankers have agreed," he said.


Higher retail loans, other income push up Axis Bank net profit 22% in Q3

During the December quarter, Axis Bank's net interest income grew 17% to Rs2,495 crore, while fee income jumped 15% to Rs1,405 crore driven by a 35% spike in fee income from the retail business


Mumbai: Axis Bank, the country’s third largest private sector lender has reported 22% rise in net profit to Rs1,347 crore on retail advances, which jumped 45%, as well as bigger other income during the October-December quarter, reports PTI.


“Going forward, our focus on the retail sector will gather more momentum as we want to take the contribution of the retail book in our overall assets to 30%,” Somnath Sengupta, executive director, corporate centre, at Axis Bank told reporters on an earnings conference call.


He also sounded bullish on the overall advances growth this fiscal saying the bank will close the year above the trend growth rate.


The bank’s net interest income grew 17% to Rs2,495 crore, while the fee income jumped 15% to Rs1,405 crore driven by a 35% spike in fee income from the retail business. Income from trading activities chipped in with Rs159 crore during the quarter, Sengupta said, adding that Rs180 crore recovery and uprgrades also helped in posting better earnings.


Total income of the bank increased to Rs8,580.30 crore during the December quarter, from Rs7,206.77 crore in the year-ago period.


For the first nine months of 2012-13 fiscal, the bank clocked 22% rise in the net profit, to Rs3,624.28 crore, from Rs2,964.94 crore in the same period of the previous fiscal.


The Shikha Sharma-headed bank reported a total income of Rs24,678.96 crore in the first three quarters, compared to Rs19,766.93 crore in the same period last financial year.


Terming the numbers as “healthy in a challenging environment”, Sengupta said the bank hopes to maintain the margins at 3.50% or above. In the reporting quarter, the bank’s NIM stood at 3.57%, a tad down from a year ago when it stood at 3.77%, but a notch higher from the second quarter when it stood at 3.47%.


Banking analyst at Kotak Securities Saday Sinha said the earnings came “slightly ahead of our expectations”, especially the net interest income which surprised positively on back of better than expected NIM (11 bps QoQ improvement, while net profit growth was further aided by lower provisions.


“Although business growth witnessed marginal moderation QoQ, it was better than the overall systemic growth. Asset quality also remained stable while addition to restructured portfolio came more or less similar to previous quarter,” Sinha said.


However, Motilal Oswal Securities VP-markets strategy and equities, Rikesh Parikh said Axis Bank's numbers are in line with estimate. Higher other income, lower operating expenses and provisions contributed to higher net, which was 6% than estimated.


On the incremental advances during the quarter, he said mortgages/home loans contributed 70% of the massive 45% spike in retail advances, followed by 11% each by auto and personal loans, Sengupta said.


The bank, in which the government holds nearly 24%, saw deposits growing 17% to Rs2,44,501 crore on the back of a healthy 13% rise in low-cost CASA book to Rs97,757 crore - 40% of its total liabilities.


Sengupta said CASA growth was driven by 22% or Rs57,521 crore rise in the savings deposits and a 30% in retail term deposits.


During the quarter, other income rose 13% to Rs1,615 crore, driven by growth in fee income which stood at Rs1,405 crore—up 15%.


The retail growth helped the bank report flat growth in the net bad loan book which stood unchanged at 0.33% and the gross NPAs also remained unchanged at 1.10%.


The bank’s provisions coverage ratio rose over 81% in the quarter, up from 75% a year ago and 80% in the second quarter.


During the quarter, the bank set aside Rs383 crore for bad loans, which remained stagnant a year ago, but down 22% sequentially from the previous quarter as the bank could get a write back on provision depreciation worth Rs33 crore during the quarter.


Sengupta said this is despite the fact that the bank had restructured loans worth Rs368 crore during the quarter, taking its overall recast loan book to Rs1,320 crore.


Stable asset quality also helped Axis post a healthy capital adequacy ratio which, including the net profit for the first nine months stood at 15.17%, with the core Tier-I capital ratio being at 10.27%.


When asked about possible slippages in Q4, he said slippages are unlikely to rise in the final quarter and also said there is no rising threat to asset quality form the SME sector, which most of the banks blame for their rising bad loan book.


When asked about status of the arbitration process to recover the $260 million it had advanced to the GMR Group for its Male airport project, which last month was taken over by the Maldives government, Sengupta did not offer a comment saying client specifics cannot be discussed.


He said, however, the bank had made provisions for its exposure to the troubled media company Deccan Chronicle group, but did not specify how much or in what percentage.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)