Every second loan’s from a nationalised bank

For the first time in more than a decade, nationalised banks have accounted for over half the total credit disbursed.

Banks in India are classified into four categories by the Reserve Bank of India (RBI) —- nationalised, private, foreign and the State Bank of India group.

According to RBI statistics, nationalised banks at the end of 2008-09 fiscal had 51% of total bank credit, followed by SBI and associates at 23%, private banks at 18% and foreign banks at 6%.

In 2007-08, nationalised banks had a 48% share of credit and this crept up last fiscal owing to the slowdown in lending by private and foreign banks.

Fourteen banks were nationalised in 1969. These are Allahabad Bank, Andhra Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank, Corporation Bank, Dena Bank, Indian Bank, Indian Overseas Bank, OBC, Punjab and Sind Bank, PNB, Syndicate Bank, UCO Bank, Union Bank, United Bank of India and Vijaya Bank.

Vijaya Bank chairman and managing director, Albert Tauro said the share of nationalised banks is expected to grow further this fiscal as credit extended by them is growing at a much faster rate than their peers. As of July 3, credit extended by nationalised banks as well as SBI and associates increased 22% year on year to a total outstanding amount of Rs 20,63,202 crore. On the other hand, credit outstanding for private banks was Rs 5,08,707 crore, a 4.2% rise year on year.

Foreign banks credit shrunk 7.1% year on year to Rs 1,58,971 crore. V K Nagar, executive director of Syndicate Bank, said, after years of aggressive lending, private banks have now slowed down considerably. “Private/foreign banks have over the last 2 years become cautious due to rising delinquency levels and the slowdown. On the other hand, nationalised banks are seeing decent growth in areas like power and infrastructure,” he said. Syndicate Bank, which has a loan portfolio of around Rs 84,000 crore, saw a 30% yoy credit growth last fiscal.

Vaibhav Agrawal, banking analyst with Angel Broking, said the biggest dent in the share of private sector was caused big players such as ICICI Bank.

“Many big private banks have been working on trimming their exposure to unsecured loans and improving asset quality,” he added. ICICI Bank grew loans by a third in the past few years by boosting retail, personal loans and credits, but has now changed focus to safer secured loans. Last quarter the bank’s bad debts as a percentage of gross advances rose to 4.63% from 3.72% a year ago.

It trimmed its loan book from Rs 2.26 lakh crore to Rs 2.18 lakh crore at the end of last fiscal.

In the midst of the slowdown last year nationalised banks, at the behest of RBI, cut lending rates sharply, leading to greater credit offtake. Canara Bank, for instance, cut home loan rates to close to 8%. However, most private sector banks did not follow suit to keep margins intact.

Allahabad Bank CMD K R Kamath said nationalised banks had been diligent in lending in the past due to which their bad loans levels are not high. Hence nationalised banks could continue lending at a steady pace during the slowdown.

Allahabad Bank reported a 22% year on year growth in credit offtake and its non-performing assets (NPAs) improved to 1.79% from 1.87% in the first quarter.

Other bankers say that as the exposure of nationalised banks to high cost deposits like bulk deposits are relatively low; they could lower lending rates without affecting net interest margins too much.

However public sector bankers caution that rapidly expanding credit and the loan restructuring schemes at the behest of the RBI could strain NPA levels going ahead.