New Delhi, Dec 3 (PTI) The banking sector has thepotential to touch double-digit loan growth next year as thereare signs of corporate demand picking up and other creditavenues stabilising, a top official of HDFC Bank has said.
After clocking just under 10 per cent growth for almost ayear, credit expansion fell to under 5 per cent startingNovember 2016. Since then it has been struggling to cross thedouble digit mark on sustained basis due to the impact ofdemonetisation and the implementation of Goods and ServicesTax (GST).
"The demand so far has been essentially driven by workingcapital and some short term loans and, may be, a little bit ofbrownfield capex but you have not had a meaningful privateinvestment especially from the private sector to give a boostto corporate credit demand," Deputy Managing Director PareshSukthankar told PTI.
The good news is that on the working capital side, giventhat commodity prices have moved up from the bottom, asvolumes increase there would be higher demand for capital, hesaid.
"But till you have a further pick up in the capex relateddemand, you cannot expect reversal in the trend... ItÂ’s beenlong time now for single digit loan growth for bankingindustry...when you go into next year if double digit loangrowth possible? I think it is if some of these issues playout," he said.
A major portion of loan demand until a few months ago wasmet through commercial paper, bonds, foreign currencyborrowings, while dependence on bank credit was less due tointerest rate arbitrage.
Expressing hope of a pick up in the next couple ofquarters, Sukthankar said, "I would still think that all ofthe factors have played out. I am not going suggesting thatthere is going to be huge capex demand, but share of the piewith others probably stabilising now...growth in corporatecredit from now will move to banks," he said. PTI DPSA.
This is unedited, unformatted feed from the Press Trust of India wire.