Renewed focus on lending won't spike NPAs: Top banker

Renewed focus of banks to increase lending will not adversely affect the bad loan situation of banks, said a top official of UCO Bank on Sunday. The focus on retail loans will indirectly fuel demand and thereby increase manufacturing activities, he said. Banks would be careful in lending in areas that have better potential for cash flow rather than conventional sector, said the banker.

Talking to the media on the sidelines of an internal meeting of top officials of the bank with the staff, A K Goel, MD and CEO of UCO Bank said that lending would be increased by lowering interest rates in areas that are profitable, so the likelihood of Non Performing Assets (NPA) increasing is less. "However, our profitability will shrink," he admitted.

The bank has focussed to increase lending in retail, agriculture and MSME sectors. "In agriculture sector, we are looking at allied sectors which have a better cash flow situation. We are opening new business avenues for ourselves and enable farmers get loans which can increase their income faster," said Goel.

The bank feels retail loans will fuel manufacturing activities thereby giving a fillip to the economy. With Non-Banking Finance Companies facing trouble, Goel said a part of this business will also come to the banks. While MSME sector is one of the major focus areas, he said that over 70% of the total loans is for working capital to meet day-to-day finance requirements.

Ajit Shah, vice president of the Federation of Industries, said that there is an urgent need to bring down the interest rates. "You have to pay eight per cent loan on car loans and 12 per cent on business loans. This is a lopsided situation. Moreover, the disbursement and approval process is slow. Industries will benefit if the process is expedited," said Shah.