As fiscal-end nears, banks push for early disbursals

It’s that time of the fiscal year: accounts need to be reconciled, books closed, balance sheets polished and statements about the targets exceed and a fantastic performance publicised. And so, as the fiscal year draws to a close, banks are pushing corporate clients to avail of approved loans and credit facilities pronto. Or else.

Well, not quite. But credit growth and margins so far this year have been disappointing for banks. So, year-end growth would not hurt their books, would it? “We’ve had three banks calling us day in and day out to withdraw the funds relating to approved credit before the year ends,” said the chief of a leading non-banking finance company who did not wish to be named.

Year-end drives are the done thing to meet annual targets, said a senior official from a public sector bank. “We are not involved in any such aggressive push, but it is a known fact that banks get desperate in March and push for faster disbursal.”

Analysts are not surprised. “Corporates also have a requirement of credit at this time. This year, the pressure is more but a lot of banks are keeping a balance between healthy balance sheet growth and healthy asset quality,” said Rajiv Mehta, analyst with brokerage India Infoline.

The aggressive push seems to be paying off. Loans grew by 16.3% on a year-on-year basis to Rs44.86 lakh crore in the fortnight to March 9, according to the Reserve Bank of India (RBI) data. Compared to the previous fortnight to February 24, credit rose by 1.8% from Rs44.07 lakh crore.

But, ‘AAA’ rated companies, traditionally the big borrowers, have stayed away from loans for much of the year due to higher cost of borrowing. Elsewhere, mega borrowers such as Rural Electrification Corporation (REC) and Power Finance Corporation have tapped the debt market to maintain liquidity. REC has said recently that, upon receiving government approval, it would raise $1 billion in the first quarter of the next financial year by selling five-year convertible bonds in international markets.

For, lending rates have spiked since March 2010 due to the RBI’s anti-inflation stance. FY13 is not expected to be any better as inflation has not cooled significantly. Experts, who had tipped the central bank to cut lending rates in April, now seem unsure. They are reworking their estimates of the extent of rate cuts in the coming months. All the more reason why lenders are so desperate to rush and push borrowers to complete the loan-taking process.